U.S. IPO market started to recover in 2023, but global market fell further (NYSEARCA:IPO)

U.S. initial public offerings in 2023 recovered moderately from 2022, but remained muted as the market was constrained by rate hikes, bank failures, and geopolitical turmoil.

Some 107 IPOs launched through Dec. 18, 2023 raised $19.4B in proceeds, compared with 71 IPOs that raised $7.7B in 2022, according to Renaissance Capital, a firm that collects and analyzes IPO data. The data excludes IPOs of special-purpose acquisition companies, known as SPACs and closed-end funds.

The market is still trying to stabilize after massive monetary and fiscal responses to the pandemic turbo-charged equity markets in 2021. Surging stocks lured closely held companies to the publicly traded markets, spawning 397 IPOs for $142.4B of capital in 2021.

Most of the activity came from small-cap companies, but some billion-dollar-plus deals grabbed the spotlight, notably chipmaker Arm Holdings (ARM), raising ~$4.9B; J&J spinoff Kenvue (KVUE), raising $3.8B, and footwear maker Birkenstock Holding (BIRK), raising almost $1.5B. Delivery app Instacart (CART), also known as Maplebear, also went public in an IPO that generated ~$660M.

In the SPAC market, just 30 blank check companies went public, Renaissance said.

The global picture

Globally, there were 1,297 IPOs, which generated $112B in proceeds, a decline from 1,368 IPOs raising $148.2B in 2022, according to the London Stock Exchange Group (“LSEG”). Like in the U.S. market, the highwater mark was in 2021, with the 2,223 IPOs raising $416.3B in proceeds.

In the past 20 years, the average number of IPOs is 1,232 with proceeds of $186B.

Three Chinese banks topped the global league tables for underwriting IPOs — Citic (OTCPK:CTPCF) (OTCPK:CTPCY), China Securities Co. Ltd., and China International Capital (OTC:CNICF), according to LSEG data.

JPMorgan Chase (JPM) ranked highest among U.S. banks at No. 4. Goldman Sachs (GS) came in sixth place, and Citigroup (C) was eighth.

Filling out the top 10 global IPO underwriters are Haitong Securities Co. Ltd. (OTCPK:HAITY) (OTCPK:HTNGF) at No. 5, Huatai Securities Co. Ltd. (OTCPK:HUATF) at No.7, Guotai Junan Securities (OTCPK:GUOSF) (OTC:GJJSY) at ninth, and Minsheng Securities Co. Ltd. (OTCPK:CGMBF) (OTCPK:CMAKY) at 10th.

In the past year, the Renaissance IPO ETF (NYSEARCA:IPO), comprised of stocks of companies that have recently completed an IPO, gained ~53%, outperforming the S&P 500’s 25% increase. The Renaissance International IPO ETF (NYSEARCA:IPOS), though, languished, dropping 20% in the same period.

Broader equity scope

In the broader global equities and equity-linked market, Bloomberg ranked Goldman Sachs (GS) as the top underwriter, followed by Bank of America Securities (BAC), JPMorgan (JPM), Morgan Stanley (MS), and Citigroup (C). Citic, China Securities, China International Capital, and Huatai Securities took the sixth to ninth positions, while UBS (UBS) rounded out that top 10.

Citic fell to sixth place from No.1 in 2022, and China International Capital slid to eighth from fifth as Chinese banks’ deal activity waned with new regulatory measures meant to aid troubled markets, including slower IPO approvals, Bloomberg said.

The road ahead

While some anticipate that the Federal Reserve will cut interest rates in 2024, which should help bolster asset values and make U.S. markets more hospitable to issuing new shares, not everyone is ready to celebrate.

“Optimists can point to the steep decline in yields since mid-October, but it remains to be seen whether that near-term macro trend will warm the IPO market and Wall Street dealmaking,” said SA Analyst Christine Short.

Several potential big IPOs may be on the horizon for 2024, including bakery chain Panera, sports merch licensing firm Fanatics (FANA), Savers Value Village, fast-fashion name Shein, social media platform Reddit, Kim Kardashian’s Skims, and investment firm General Atlantic.