As the stock market came back up strongly in the first half of 2023, the market for initial public offerings saw a rebound from an anemic showing in 2022.
Activity Picks Up Pace. The U.S. IPO market saw 58 offerings so far this year, up 31.8%, and total proceeds jumped 125.5% to $9.8 billion, data from Renaissance Capital showed. This compares to the 2021 full-year tally of 397 IPOs
The firm attributed the slackness seen in 2022 to the Ukraine war, a valuation correction in high-multiple stocks, aggressive fed rate hikes, and looming recession risks.
Techs Lag: Tech IPOs have lagged this year. Across all industries belonging to the tech sector, only 10 companies raised $100 million or more in the first half of the year, FactSet data showed, according to CNBC. Cut to the same period in 2021, there were 517 IPOs that raised over $100 million, led by billion-dollar-plus IPOs from Bumble, Inc. BMBL, Affirm Holdings Inc. AFRM, SentinelOne, Inc. S and UiPath, Inc. PATH, the report noted.
See Also: How To Invest In Upcoming IPOs
The lackluster trend is in contrast with the buoyancy seen in the tech stocks this year. So far this year, the Nasdaq Composite and the Nasdaq 100 Index are up about 34% and 41%, respectively,
Outlook: Ernst & Young expects the global IPO market to see a resurgence in late 2023 as economic conditions and market sentiment gradually improve with the Federal Reserve's monetary policy hikes potentially ending soon.
But not many agree. Lise Buyer, founder of IPO consultancy Class V Group, said, “There will be incremental activity after a period of absolute radio silence but it isn't like companies are racing to get out the door,” CNBC reported.
She reportedly attributed her tempered outlook to the valuation disconnect between 2021 and now, as many stocks haven't recovered from the brutal sell-off seen in 2022.
Wall Street Horizon, a corporate events data aggregator, said in a blog post that a flurry of IPOs may not materialize in the coming weeks, as July and August are typically weak months for IPOs. Given the pickup in secondary market activity, the firm expects a similar trend for the IPO market in the final four months of the year.
Some Widely Anticipated IPOs In 2H'23:
VinFast: Vietnamese electric vehicle startup VinFast Auto Ltd. has implemented a SPAC deal with Black Spade Acquisition Co. BSAQ, which values the former at $27 billion. In connection with the deal, the company has filed with the SEC to offer up to 6.97 million ordinary shares and 14.83 million warrants, along with 14.83 million ordinary shares underlying warrants.
Panera: Panera Brands Inc., which owns the fast-casual and hospitality brand Panera Bread as well as Einstein Bros. Bagels and Caribou Coffee, in late May announced management and board changes in preparation for its eventual IPO. Incidentally, the proposed IPO will help the company reenter the public market after it was yanked off in 2017 following its acquisition by JAB Holding, the investment arm of the Reimann family.
Stripe: Among the others waiting in the wings is payment processor Stripe. Co-founders and brothers John Collison and Patrick Collison said at the start of the year that the company will make a decision to tap the public market within the next year, CNBC reported in January. Stripe said in a press release in March that it has raised more than $6.5 billion at a $50 billion valuation.
Instacart: Instacart is a grocery delivery and pick-up service operating in the U.S. and Canada. In May 2022, the online grocer confirmed that it confidentially submitted a draft registration statement on Form S-1. The company reportedly shelved its IPO plans amid the equity market swoon. Now that the market has reversed course, the company could rethink its plans. The company reportedly slashed its valuation by about 40% to $24 billion.
Reddit: Reddit, which shot to prominence during the meme stock era, was rumored to be toying with IPO plans in late 2021 at a $15 billion valuation. Fidelity, which led a 2021 funding round, took a stake valued at $28.2 million in the company, TechCrunch reported. The fund's monthly disclosure released in late May showed the investment firm had cut the value of its Reddit equity stake to $16.6 million, down 41.1% from Aug. 2021.
The Information reported in February that Reddit could test the IPO waters in the second half of 2023.
Discord: Discord, a chat platform co-founded by Jason Citron and Stanislav Vishnevskiy, could be targeting a $15 billion IPO, Bloomberg reported in March 2022. The platform that is popular with gamers reportedly approached investment bankers in connection with its public debut. Incidentally, Discord rejected a $12 billion proposal from Microsoft Corp MSFT in 2021.
Others that could be prepping for listings include Databricks, a data and AI company. Earlier this year, the company raised a $1.6 billion Series H financing led by Morgan Stanley, which valued the company at $38 billion. The company's recent acquisition of OpenAI rival MosaicML for $1.3 billion is seen by market watchers as one step closer to an IPO.
Fortnite developer Epic Games, Chime, a San Francisco-based fintech company, and Fanatics, an online retailer of licensed sportswear, sports collectibles, NFTs, trading cards, and sports merchandise, etc, could also be contemplating a debut in the public market, provided the market momentum continues to be upbeat.
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