Several experts have long predicted that 2025, not 2024, will be the key year for IPO ‘s, and this view is gaining traction as the current market remains sluggish. Companies prefer certainty when going public, but uncertainty looms ahead, especially with the upcoming US election.
This makes the end of the September quarter a critical point for evaluating the IPO landscape for 2024. Many executives are hesitant to enter the market during the volatile period surrounding the November elections.
So far this year, companies have raised about $26 billion from IPOs in New York, including well-known names like Reddit and Viking Cruises. This amount surpasses last year’s total of $20 billion and is significantly higher than the $8 billion raised in 2022.
However, it still falls short of the higher amounts seen in the pre-2020-21 boom years. The argument for 2025 centers on companies spending this year addressing the aftermath of the previous boom, with valuations needing to come down.
Executives have shifted their focus from revenue growth to plans for profitability. The turbulent year of 2022, marked by a 19% drop in the S&P, left many startups on edge, while 2023’s surprising 24% rally, despite recession fears, caught many off guard.
Election Uncertainty and Market Fluctuations Hinder 2024 IPOs
With the November election curtailing opportunities in 2024, companies will likely use this time to prepare for future listings. Some may regret not taking advantage of the stronger market between March and June, which could have supported more deals.
Historically, the IPO market has been uneven, often skewed by standout deals like Alibaba’s $25 billion IPO in 2014.
Moving forward, a recovery in the IPO market depends more on stability than on a booming market. As seen in August, just a few economic reports can lead to significant market fluctuations.
The Federal Reserve’s readiness to respond to economic data adds to this uncertainty, making it challenging for companies planning their IPOs to time their entries amid fluctuating market sentiments.
Federal Reserve’s Policy and Election Looms Cast Shadow on IPO Recovery
Federal Reserve’s Policy and Election Looms Cast Shadow on IPO Recovery
The U.S. IPO market has made a strong comeback in 2024 after nearly two years of inactivity, fueled by decreasing fears of a recession and a significant stock market rally. However, investors remain cautious, favoring companies that show a clear path to profitability, which has tempered enthusiasm.
Analysts believe a more solid recovery may develop next year. Mike Bellin, IPO Services Leader at PwC U.S., said that the current IPO market recovery is very cautious and deliberate. He added that as the market gains momentum and uncertainties are resolved, investors may become more willing to invest in riskier IPO candidates.
“Right now, the IPO market recovery is very sober and clinical. As we get more momentum and alleviate some uncertainty, we may move into a market where investors are willing to put more money in riskier IPO candidates.”
Mike Bellin, IPO Services Leader at PwC U.S.
Mike Bellin also pointed to the uncertainty surrounding the election and concerns about the Federal Reserve’s ability to guide the economy smoothly.
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