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There are signs of a comeback for the IPO market. Publicly traded companies raised $31.9 billion in secondary shares in the second quarter, the most since the third quarter of 2021. Revenues were up about 48% over the prior three-month period and are up 150% from the same period last year, according to Dealogic. Secondary offers are seen as a leading indicator of IPO volume as they create liquidity for investors and signal the market that deals can be executed. Secondary share sales allow listed companies to issue new shares and raise new capital. Pre-IPO investors can reduce or divest their stake in the company. “What that means is that we’re going to see an explosion of IPOs once the window reopens,” said Barrett Daniels, co-leader of U.S. IPO services at Deloitte. “I think a lot of people in my world and IPO world are expecting this V-shaped recovery for the IPO market.” The IPO market has been in a doldrums since February 2022, when the Russian invasion of Ukraine began. The Federal Reserve’s interest rate hikes, which began the following month, also rocked the market. Since then, investors have been wary of lackluster returns from companies that went public during the stimulus-fueled boom of 2020 and 2021. Robinhood, Coinbase, and Rivian were among some high-profile companies to go public during that time. Their shares have all lost at least half their value since then. Doordash made its public debut in 2020 and is down more than 15% since going public. .SPX COIN,HOOD,DASH mountain 2019-12-31 SPX vs Coinbase and Robinhood since 2020 That said, secondary offerings are on the rise, which could bode well for IPOs going forward. There have been several sizeable secondary offerings in various sectors, with healthcare and industrial being the most active in the first half. GE HealthCare, Lucid Group, Agilon Health and American Water Works completed the largest secondary transactions of the year, raising $7 billion, according to LSEG Deals Intelligence. “This is consistent with what we’re also seeing in the IPO pipeline,” said Matthew Kennedy, senior strategist at Renaissance Capital. “We also saw some activity from the technology sector, with a secondary activity from Clearwater Analytics. It was a small but positive sign for the many tech deals waiting for a better IPO market.” There are signs that the IPO market is beginning to thaw. Fast-casual Mediterranean chain Cava Group went public in June, and stocks doubled on debut. Beauty platform Oddity Tech started trading on Tuesday with a 30% pop. Companies will weigh several key factors, including recent performance in the IPO markets holding up to demonstrate clear profitability, companies reaching their desired valuations and a slower rate hike, Kennedy added. And while the wave of offerings from existing public companies has yet to be matched by a jump in new listings, the uptick in activity bodes well for the IPO market as it demonstrates growing demand from equity investors. “What we’re seeing now is companies, rather than investing in that 2020 IPO that we liked so much, we think this secondary offering is a better proposition for us right now. So we’re moving in the right direction, from less risky to riskier. Ultimately, that’s what we need to warm up the IPO market again,” said Daniels. This is happening while the stock market is going through a sharp rally. Year-to-date, the S&P 500 is up 18%, boosted by solid economic data and expectations that the Federal Reserve will end its rate hike campaign in the near future. Volatility has also declined sharply in 2023, making it a more attractive time for private companies to go public. The Cboe Volatility Index (VIX), commonly known as Wall Street’s “fear gauge,” is trading near its lowest level since January 2020, before the Covid-19 pandemic began. “I think there’s a good chance we’ll see the IPO market ramp up towards the end of this year and next year. With the IPO pipeline, as healthy as it is, I wouldn’t be surprised if it’s just that crazy once it becomes very clear that the window is open,” Daniels said.
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Sources 2/ https://www.cnbc.com/2023/07/23/signs-are-emerging-that-the-ipo-market-can-make-a-comeback-soon.html The mention sources can contact us to remove/changing this article |
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