Strategy

Experts think the 2024 IPO market looks solid

And maybe 2023 wasn’t as bad as it looked on paper.
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5 min read

Read anything about the IPO landscape in 2022 and 2023, and you’d find a pretty grim picture. So here’s a question to jumpstart your 2024: Will this be the year the IPO market finally makes a much-needed rebound?

There’s a collective sense of bottled, pent-up momentum for the 2024 IPO market, and whether that excitement turns into public offerings depends on a number of moving parts.

Mike Bellin, the co-leader of PwC’s IPO services practice, and Eric Hall, partner with the CFO consulting firm FLG Partners, had the same two-word reply, with respect to IPOs in 2024: “Fingers crossed.”

From some angles, the 2024 IPO glass looks half-full. “We had some good earnings momentum coming out of 2023 and some good projections going into 2024 and beyond. That’ll be part of the catalyst that hopefully gets things going again,” Bellin said. “There’s a lot of, I’ll say, dry powder on the sidelines with private equity, with investors that are looking for the right assets to invest in. I think everything’s there for the making of a strong IPO market.”

There’s also the M&A market, which looks set for a solid 2024, Hall and Bellin point out.

“If the M&A market returns and it’s strong, that’s going to be positive for the IPO market,” Bellin explained. “If the financing market comes back with interest rates declining, better pricing, that’s going to help the M&A market, and that’s going to help the IPO market, longer term.”

The year ahead. So, if the IPO market isn’t in a death spiral—despite the recent drought —what’s it doing instead? Angela Lee, a professor of venture capital at Columbia Business School and the founder of investment network 37 Angels, doesn’t agree with the “sky is falling” IPO narrative of recent years, noting the importance of differentiating between the sheer number of IPOs and deal value. In fact, things might just be, well, normal.

“Look at every chart. What it basically looks like is things kind of slowly grew from 2010 to 2019,” she told CFO Brew. “We all collectively went insane in 2020 and 2021. And then we corrected in 2022 and 2023, and things look a whole lot like 2019 right now—which is in no way, shape, or form a catastrophic market.”

In her mind, 2020 and 2021 were anomalies, and 2022 and 2023 weren’t as calamitous as they’re made out to be.

“They look terrible if you only compare them to [2020 and 2021], but if you even just look three years prior, they were actually pretty normal years,” she said.

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Bellin agrees. “All that momentum that we spent on 2020, 2021—[and] the rise of [special purpose acquisition companies] in that period, too—was part of the big reason why 2022 was a slower year, as a lot of those companies who went public maybe didn’t perform as they’d hoped,” he told CFO Brew.

2023, meanwhile, was hindered by the rising interest rate environment and geopolitical uncertainty, he added.

It depends. But the glass/IPO landscape could just as easily look half-empty, if a few key factors don’t fall into place, Hall and Bellin explained.

“Inflation is showing itself to be a little stubborn,” Hall noted, and that, of course, has spelled trouble for interest rates.

“We’ve seen some issuers say they’re not going to go public until they see interest rates decreasing,” Bellin added.

A robust IPO market in 2024 will really depend on those kinds of macro events, such as “interest rates, the recession soft landing, and then some geopolitical uncertainty out there,” Bellin said. “How’s that all going to factor into the window being open? And then the presidential election, of course.”

First move. Companies looking to go public this year are also asking the same question everyone gingerly posed on the diving board as a kid: Who wants to go first?

Bellin notes homebuilder Smith Douglas, which went public on January 11, 2024, had what “looked like on paper a pretty successful deal” pointing out that “they priced above the range. They traded well, I believe. It was well received by the market.” It all added up to “a positive environment” for potential issuers in 2024, he added.

Lee stresses that it’s important to view IPOs separately. A single IPO never truly unlocks the market, in her eyes. But while macroeconomic factors will be the real key to unlocking 2024’s IPO market, Hall and Bellin think it can’t hurt to get some big names in the mix. Ultimately, it’s largely a matter of how things are priced that could create some collective excitement.

“It just creates positive momentum, whether it’s a big name that would go public, and they were traded well, [and] they’re well received by the market, that would be a positive indicator,” Bellin said. “On the flip side, if you have several smaller IPOs and they all price well in the range, and they trade well post-pricing, that’s going to create positive momentum out there.”

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