A 2023 Perspective on Global Market Dynamics
The initial public offering (IPO) terrain has exhibited signs of rejuvenation in 2023, with a series of prominent entities embarking on their journey in the public markets. A resurgence in activity, the fervor has not escalated to the zeniths witnessed in the year 2021. High-profile entrants into the public domain include ARM, Instacart, and Klaviyo. A detailed analysis by Renaissance Capital reveals that an estimated 160 entities are on the cusp of initiating IPOs, collectively aiming to amass funds surpassing $8 billion. Projections for the year 2024 indicate an expectation of approximately 15 IPOs, each seeking to secure a minimum of $100 million, predominantly in the latter half of the year.
The Private Company Watchlist (PCW), which includes more than 200 potential IPO candidates, has proven to be a prescient gauge, with 17 of the largest 2023 IPOs coming from this compilation. That list includes semiconductor giant Arm. The pattern of substantial venture-backed startups opting to remain private for extended periods has been observed, but the prospect of improved market conditions in 2024 may lay the groundwork for these companies to transition to public ownership. The coming year will see highly anticipated IPOs from companies such as Reddit, Rubrik, Panera, Kim Kardashian’s Skims, SHEIN, Stripe, and Liquid Death.
Ernst & Young’s market forecast suggests that an easing of inflation and the potential for interest rate cuts could catalyze a resurgence in IPO activity. However, companies are expected to remain cautious and wait for more favorable market conditions. A robust rally in the stock market in 2023, IPO activity remained muted, with gains largely concentrated in the mega-cap technology sector. The broader market did not reflect these gains, as concerns about inflation and recession persisted. The post-IPO performance of IPOs continued to warrant caution, with many failing to sustain the market’s initial enthusiasm.
In stark contrast, emerging markets such as Indonesia, Malaysia, and Turkey have experienced strong IPO activity in 2023, outpacing the five-year average in terms of both deal volume and proceeds. This surge in activity comes against a backdrop of volatile equity prices and uncertainties surrounding interest rates and geopolitical events, prompting some companies to reassess or postpone their IPO ambitions. Large-cap IPOs have generally underperformed their smaller counterparts in the post-IPO period, leading some large-cap companies to implement cornerstone strategies to bolster confidence, notwithstanding the potential impact on liquidity.
The EMEIA region (Europe, the Middle East, India, and Africa) has outshone the Americas and Asia-Pacific in terms of IPO yields in 2023. Approximately 70% of EMEIA’s IPOs have outperformed their offer prices, with Turkey, the UAE, and India emerging as notable markets. Turkey, in particular, has witnessed all its newly public companies achieve positive returns, while the UAE and India have also enjoyed considerable success rates.
The IPO market in 2023 has been characterized by a blend of cautious optimism and tactical positioning. While certain regions and sectors have demonstrated robust performance and adaptability, the broader market remains vigilant of economic indicators and prevailing market conditions. The buildup to the 2024 IPOs indicates a potential alteration in market dynamics, with a diverse ensemble of companies poised to imprint their presence on the public platform. As the market perpetuates its evolution, the trajectory of these newly public entities will serve as a pivotal gauge of the vitality and orientation of the global economic landscape.
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