Slow and steady is a virtue in this US IPO recovery


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After two tough years, the market for initial public offerings in the US is finally showing signs of life. 

Excluding blank cheque companies, 78 companies have listed on US exchanges during the first six months of 2024, raising more than $17bn, according to LSEG. That is the best start for capital raised from traditional IPOs since 2021. That was a record year — with a staggering $151.4bn raised. 

Chart about US IPO market

2024 will come nowhere close to that. Gone are the days when the mere mention of “cryptocurrency” or “EV” was enough for a lossmaking company with lofty growth projections to net millions of dollars from the public market. That is no bad thing.

Investors have burnt fingers from 2020 and 2021. Some of the biggest deals from those blockbuster years continue to trade well below their IPO price. Video game tool maker Unity Software, dating app Bumble and electric vehicle maker Rivian Automotive are down between 70 to 81 per cent. Mortgage lender Rocket Companies is about a quarter lower.

More broadly, the Renaissance Capital IPO Index, which tracks issues for two years after their floats, is up 7 per cent so far this year, compared with the S&P 500 index’s 16 per cent gain.

Line chart of Year to date performance (in %) showing Recent US IPOs have continued to lag behind S&P 500

One upshot from this lagging performance is that companies considering a listing will have to be more conservative in their pricing. In the current high interest environment, where savers can get a 5 per cent annual percentage yield on a six-month certificate of deposit, companies looking to go public need to have a proven record of growth and a clear path to profitability.

Tellingly, the three biggest IPOs this year are not from the technology sector. Amer Sports, which raised $1.56bn in January, is the maker of Wilson tennis rackets and Arc’teryx apparel. Viking Holdings, which raised a similar amount, is a luxury cruise operator. UL Solutions, a safety testing and inspection company, raised over $1bn. All three are established, mature businesses rather than young tech start-ups. Of the three, Viking and UL are up about 40 and 50 per cent respectively, while Amer is down 7 per cent.

Even among tech IPOs, established names carry cachet. Reddit, one of the internet’s oldest social media sites, has more than doubled in value since pricing its shares in March.

IPO activity should continue to pick up as companies look to list their shares ahead of November’s high stakes US presidential elections. Don’t expect a 2021-style deluge though. The recovery in the US IPO market will be slow and steady. That is a welcome change from the boom and bust bursts of recent years.

pan.yuk@ft.com



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