Following notable listings from companies like Arm Holdings Plc and Birkenstock Holding Plc, the US IPO market was poised for a substantial resurgence in 2024. Nevertheless, the turbulence experienced in September and October has led numerous potential IPO candidates to reassess their strategies.
Among those contemplating a delay is Brightspring Health Services Inc., a health-care services provider backed by KKR & Co., which had originally aimed to raise $1 billion. Individuals familiar with the matter, who requested anonymity due to its private nature, disclosed this potential postponement.
Waystar Holding Corp., supported by EQT AB and recently filing publicly, is still considering market conditions while moving forward with its IPO plans. Similar precautions are being taken by other entities such as Microsoft Corp.-backed Rubrik Inc. and car-sharing business Turo Inc., as reported by Bloomberg News. Vietnam-based internet startup VNG Ltd. has already opted to defer its US listing until more favorable conditions emerge in January.
“The fourth quarter for IPOs will in all likelihood be slow,” commented Cully Davis, vice chairman of equity capital markets and head of West Coast TMT investment banking at Jefferies Financial Group Inc. “After periods of muted activity, you generally need one or two deals to trade well to inspire confidence and draw investors and issuers back.”
Despite the cautious sentiment, several IPO-bound businesses, predominantly small enterprises, have proceeded with share sales. Notably, Singapore-based ecommerce platform Webuy Global Ltd. experienced a 34% surge in its debut after raising $15.2 million last Thursday.
Over the past month, approximately 30 companies have publicly submitted IPO filings to the US Securities and Exchange Commission, according to Bloomberg data. Some of these filings may be driven by a desire to expedite listings, especially in light of potential disruptions due to a looming threat of a US government shutdown in November.
Mach Natural Resources LP, for instance, publicly filed on Oct. 16 and is slated to price its shares on Tuesday. The oil exploration and drilling company seeks to raise as much as $210 million.
The pinnacle of September’s listings was SoftBank Group Corp.-backed chip designer Arm’s monumental $5.23 billion IPO, marking the most significant month for US listings since January 2022. However, subsequent underwhelming performances, including Birkenstock’s 13% decline in its trading debut on Oct. 10, have contributed to a market-wide decline exacerbated by persistently high interest rates and political uncertainties.
Geopolitical tensions, including conflicts in Ukraine and the Israel-Hamas standoff, could further disrupt markets and potentially stall the IPO pipeline into the next year.
“Issuers are facing uncertainties that would give them pause to move forward with an IPO,” remarked Josh Weismer, head of equity capital markets for Mizuho Americas. “Until we get clarity on geopolitical events, the government shutdown, and in turn where the Fed is heading on rates, companies are not rushing to be the next IPO to hit the market.”
Investors are also adjusting their approach to valuation and discounts for upcoming transactions in light of the returns for IPOs priced after Labor Day in the US, noted Weismer.
This cautious climate is expected to encourage those proceeding with IPOs to adopt conservative strategies. Davis from Jefferies predicts that the cornerstone strategies deployed by Arm and other major players will likely be emulated. Cornerstone investors, purchasing significant shares in an IPO, can serve as a powerful signal of confidence in a potentially unstable market.
Following a record-setting 2021, where over $338 billion was raised by more than 1,000 companies, the US IPO market experienced a nearly two-year drought. This year, only $24 billion has been raised in 140 listings, according to Bloomberg data.
The IPO slowdown extends beyond the US, with global listings peaking in 2021 at $330 billion, then declining to $181 billion in 2022 and further to $117 billion this year.
Market uncertainties led Triton to postpone a share sale for German gearbox maker Renk AG, while French software company Planisware postponed its IPO on Euronext Paris, citing challenging conditions.
Despite these challenges, some entities remain undeterred. CVC Capital Partners is gearing up for a public offering in Amsterdam as early as November, potentially becoming one of Europe’s largest listings this year.
In the US, venture-backed companies like Stripe Inc. and Discord Inc. faced delays due to the listings freeze last year. Among those still awaiting a brighter IPO horizon are numerous startups backed by venture capital, with Amer Sports, Esdec Solar Group, GameChange Solar, and New Era Cap potentially going public in the first half of 2024.
Representatives for Brightspring, KKR, Waystar, and EQT have declined to comment on the matter.
In conclusion, the recent uncertainties have injected a dose of caution into the anticipated resurgence of the US IPO market, prompting potential candidates to carefully navigate their paths towards public offerings in the coming year.
Source: Bloomberg
