The anticipated resurgence of the US IPO market, set in motion by high-profile listings from companies like Arm Holdings Plc and Birkenstock Holding Plc, now encounters uncertainty following a turbulent September and October. Consequently, many IPO candidates are reevaluating their plans for 2024.
Among those contemplating a delay is Brightspring Health Services Inc., a health-care services provider backed by KKR & Co., which had initially aimed to raise $1 billion. Insiders familiar with the matter, who spoke on condition of anonymity due to its confidential nature, reported the potential postponement.
Waystar Holding Corp., a health-care payment firm supported by EQT AB, has expressed intentions to proceed with its IPO as scheduled. However, the company is closely monitoring market conditions, as per an insider familiar with their plans, who requested anonymity.
Other companies, including Rubrik Inc. (supported by Microsoft Corp.), Turo Inc., and Vietnam-based VNG Ltd., are also contemplating delays in their listings, as reported by Bloomberg News. VNG Ltd. has already deferred its US listing, anticipating more favorable conditions in January.
Cully Davis, Vice Chairman of Equity Capital Markets and Head of West Coast TMT Investment Banking at Jefferies Financial Group Inc., offered insight, stating, “The fourth quarter for IPOs will in all likelihood be slow.” He emphasized the need for successful deals to bolster confidence and attract both investors and issuers following periods of subdued activity.
Despite the wavering market, IPO-bound businesses, primarily small-scale enterprises, continue to move forward with share sales. Last Thursday, Singapore-based e-commerce platform Webuy Global Ltd. experienced a 34% rise in its debut, after successfully raising $15.2 million.
Over the past month, approximately 30 companies have publicly filed for IPOs with the US Securities and Exchange Commission, according to Bloomberg data. Some of these companies may be expediting their filings to expedite their listings, particularly in light of the potential threat of a US government shutdown looming in November.
One such example is Mach Natural Resources LP, which filed publicly on October 16 and is set to price its shares on Tuesday. The oil exploration and drilling company aims to raise up to $210 million.
The highlight of the year’s IPO landscape was the monumental $5.23 billion offering of Arm Holdings, a chip designer backed by SoftBank Group Corp., making September the most substantial month for US listings since January 2022. However, the subsequent lackluster performances of listings like Birkenstock and Instacart have dampened the initial optimism. By Friday, Arm and marketing company Klaviyo Inc. had also dipped below their IPO prices.
These underwhelming showings coincide with a broader market decline and persistent high interest rates, as well as uncertainties in Washington regarding a potential federal government shutdown in the coming month. Geopolitical concerns, including ongoing conflicts in Ukraine and the Middle East, may further disrupt markets and impede the IPO pipeline into the next year.
Josh Weismer, Head of Equity Capital Markets for Mizuho Americas, remarked, “Issuers are facing uncertainties that would give them pause to move forward with an IPO.” He emphasized the need for clarity on geopolitical events, government shutdowns, and the Federal Reserve’s stance on interest rates before companies are likely to pursue IPOs.
The recent performance of IPOs priced after Labor Day in the US is also influencing investors’ approach to valuation and discounts for upcoming transactions, according to Weismer.
In light of these challenges, companies moving forward with IPOs are expected to adopt cautious strategies. Davis from Jefferies predicts that cornerstone strategies, exemplified by Arm and other major players, will be emulated. This involves cornerstone investors purchasing large blocks of shares, signaling confidence in a potentially unstable market, albeit with potential liquidity constraints.
Following a record-breaking 2021, where over 1,000 companies amassed an astounding $338 billion, this year’s performance in the US IPO market has notably dampened. Thus far, only $24 billion has been raised through 140 listings.
The slowdown in IPO activity is not unique to the US. Global listings, which peaked at $330 billion in 2021, have steadily declined to $181 billion in 2022, and $117 billion thus far in 2023.
Market turbulence has led to the postponement of share sales for companies like German gearbox maker Renk AG by Triton, and the delay of the IPO for French software company Planisware on Euronext Paris.
However, some companies remain undeterred by market volatility. CVC Capital Partners is preparing for a potential public listing in Amsterdam as early as November. The private equity firm, valued at approximately $15 billion during its minority stake sale to Blue Owl Capital Inc. in 2021, could be one of Europe’s largest listings this year.
In the US, venture-backed companies like Stripe Inc. and Discord Inc. were among those eyeing IPOs when the listings freeze took effect last year. Other companies, including Cohesity Inc. and Reddit Inc., were also affected.
Numerous companies, particularly startups with venture capital backing, are in a holding pattern, awaiting brighter prospects on the IPO horizon. Companies like Amer Sports, Esdec Solar Group, GameChange Solar, and New Era Cap are among those potentially looking to go public in the first half of 2024.
Representatives for Brightspring, KKR, Waystar, and EQT declined to comment on the matter.
In summary, the current performance in the US IPO market reflects a marked contrast to the record-breaking achievements of 2021, with significantly subdued activity and a notable decrease in capital raised through listings.
Source: Bloomberg
