Dec 21, 2023: Bankers involved in advising companies on stock market listings are looking ahead to a potentially brighter year for initial public offerings (IPOs) in 2024, buoyed by the U.S. Federal Reserve’s indication of a possible reversal in the rapid rise of interest rates.
David Ludwig, Goldman Sachs’ global head of equity capital markets (ECM), is optimistic about a significant improvement in IPO markets next year compared to the relatively sluggish activity observed in 2023, which stands as the second-worst year for ECM transactions in the last decade.
Despite this year’s challenges, some recently listed companies, including Arm Holdings and Birkenstock, have seen a positive turn in their stock prices amidst a global equity rally driven by sentiments suggesting a peak in interest rates.
Market sentiment around a potential pause or decline in interest rates is prompting a shift from bonds to shares among investors, according to Stephane Boujnah, CEO of Euronext, the European stock exchange group.
The positive outlook for 2024 includes the anticipation of significant IPOs such as Singapore-based fashion group Shein’s reported IPO in the U.S., potentially valued at $90 billion. Additionally, buyout group Permira is preparing an IPO for Golden Goose, renowned for its luxury distressed sneakers, in Milan, aiming to raise around 1 billion euros.
Dealmakers expect buyout funds to become a key source of IPO activity as they face pressure to return capital to investors after a slow year for private equity exits.
Furthermore, asset managers are exploring IPOs to finance expansion and facilitate the sale of their stakes, with CVC considering reviving its listing plans and General Atlantic reportedly planning a U.S. listing.
Corporate break-ups and spin-offs are also on the radar for next year, with European conglomerates like Bayer, Renault, Sanofi, and Vivendi exploring potential divestments of their business divisions.
However, bankers caution that successful IPOs will be crucial for the market to open up to a broader range of companies in 2024. Additionally, the U.S. presidential election might restrict companies’ access to the equity capital markets in the latter part of the year.
While the IPO market revives, dealmakers aim to sustain income by arranging stake sales and capital increases for existing publicly traded companies, a trend observed through secondary sell-downs that took place in 2023.
Looking ahead, stakeholders anticipate a different landscape in 2024, expecting reasons for optimism despite the likelihood of continued market volatility.