Offerings are bouncing back, as the upcoming US election creates opportunities and risk.
The US IPO market is seeing renewed momentum as the 2024 presidential election approaches, with investors and analysts eyeing potential opportunities ahead. Last week marked the busiest period for IPOs since February, with four out of five companies successfully pricing their offerings and raising a combined $1.1 billion.
This resurgence follows a prolonged period of stagnation, sparking confidence that the market is turning a corner.
“In the past, after major corrections like the 2000 dot-com bubble and the 2008 financial crisis, it took several years for IPO volume to recover, even when the general stock market was on the rebound. We’re seeing similar patterns now, where IPO activity is picking up, but it will likely take more time for a full recovery,” said Jay Ritter, an IPO expert and the Joseph B. Cordell Eminent Scholar at the University of Florida.
Among the most notable IPOs last week, were Ceribell, a medical technology firm, and Upstream Bio, a biotech company, highlighting life sciences’ dominance of IPO activity. Ritter notes that life sciences have comprised 30% of all IPOs since 2013, even though many companies in this space are still in early stages and generating minimal revenue.
“Life science companies aren’t household names, but they’ve maintained a steady presence,” said Ritter. “Even in a recovering market, the fundamentals for these companies are strong.”
Election Impact On Market Sentiment
The IPO market is also eyeing the US presidential vote in November. Historically, volatility marks election years, but they present potential gains as investors anticipate policy changes that could spur growth. This dynamic, combined with strong stock market performance, has many companies considering IPOs to take advantage of current momentum.
“With the S&P 500 and NASDAQ hitting all-time highs, many companies feel the timing is right for an IPO,” said Ritter. “Private equity firms are eager to exit their investments, sensing this market momentum.”
While displaying some green shoots, the IPO market remains selective, and not all companies are finding success. Camp4 Therapeutics, another biotech firm, struggled to price its offering, reflecting a more cautious approach from investors.
“Valuations today are more grounded in reality,” said Ritter. “Investors are still willing to pay for growth, but they expect more established business models, especially in biotech, where timelines are long and uncertain.”
‘Timing’ Is Key For Offerings
While market sentiment drives the IPO game more than economic data, according to Ritter, the market must still eye interest rates and inflation. Ritter, however, believes those macro factors take a back seat to improving market sentiment, particularly as recession fears diminish, and may provide a stronger tailwind for IPO activity.
“There’s a window of opportunity for companies considering IPOs,” said Ritter. “But timing will be key as they try to capitalize on the market’s renewed momentum while navigating potential volatility ahead.”
International companies, particularly from Europe, may also help sustain US IPO activity, making the US a continued hub for capital raising despite ongoing geopolitical tensions.
While the IPO market in the US shows signs of recovery, companies must remain cautions, as the market is still selective and election-driven uncertainty is likely to linger for some time after Election Day on Nov. 5. before his title. Now I’ve confirmed that you don’t ghost sources to your copy.
