Green shoots are emerging in the IPO market. Here are the stocks to keep an eye on as they go public soon
Two months ago I wrote an article titled: “The IPO market looks very shaky and faces numerous challenges.” Two months later, the IPO market is still unstable, but there are clear signs of improvement. First, the broader market is about to hit new highs, which is always a good sign for IPOs. Second, three $100 million IPOs filed for IPOs last week, including Viking (the cruise operator) and Rubrik, a data management platform. “Recent filings have been encouraging,” Matt Kennedy of Renaissance Capital told me. Third, several recent high-profile IPOs are positive. Among them is the venture capital-backed Astera Labs, one of the first AI stories of 2024 (the company makes chips that increase the efficiency of servers), a $700 million deal in mid-March for $36 The stock market went up to $95 and is now at $70, well off its highs but still up 90%. Reddit went public a day later at $34 and is now at $45. From the company's perspective, this is a success, even though it has been trading at the lower end of its range since going public. Greg Martin of Rainmaker Securities told me that the recent performances of Reddit and Astera Labs “were nice boosts to the IPO market. They are great data points with high quality after-market performance (so far) that represents real market demand for new issuers.” The calendar is starting to get busier. Finally, and best of all, at least four IPOs will go public on the NYSE in the next two weeks, each with a valuation of over $200 million. Also on the calendar is UL Solutions (the parent company is Underwriters Laboratories, known for its product testing, inspection and certification services), which is looking to raise nearly $800 million on the NYSE this Friday. Nursing facility provider PACS Group plans to raise $400 million on the NYSE this Thursday. Next week, digital advertising company Ibotta plans to go public in a $450 million initial public offering, and Centuri Holdings, an energy and utility infrastructure services company, will seek to raise $250 million. If you add these four factors together, you'll have $1.9 billion in IPO money in the next two weeks. Is that a little or a lot? Compared to the last three years, that's a lot. Here's an easy way to look at IPOs. The IPO market is seasonal, but on average in a good year (pre-Covid) we could see around $1 billion or more per week in IPOs, and we could expect three to five IPOs each week over $100 million bring in US dollars. That hasn't happened in a long time. Despite two billion-dollar deals in the first quarter (from Astera Labs and Kaspi.kz), the IPO market only raised $8 billion in the first quarter, according to Renaissance Capital, about half of what a healthy market would achieve. But now we have four IPOs that we're looking to raise nearly $2 billion in two weeks. That piques my interest. There are many companies waiting to go public. Let's start with the tech hopefuls. Among major VC-backed tech companies, Astera Labs has already gone public. Rubric (Cybersecurity, Backup and Recovery Software for Enterprises) was submitted on April 1 and is expected to be released later this month. Other companies offering public sign-ups include Waystar (hospital/medical billing software) and Turo, a car-sharing service. Many companies prefer a confidential filing, meaning the filing is not yet public, as it offers the most flexibility and doesn't require companies to reveal a lot of information to the public too soon. Companies that have confirmed that they have disclosed confidential information or are believed to have done so include Ingram Micro (tech services/software), Circle (crypto/stablecoin), ServiceTitan (residential and commercial heating software), Del Monte (canned fruit) and Panera Bread (restaurant chain) and SeatGeek (online ticket marketplace). Other names in circulation that have not been filed but are on the rumored list include Klarna (buy now, pay later), Databricks (data software), Epic Games (video games) and Rokt (e-commerce/tailored offers and discounts). ), Chobani (yogurt and coffee), Liquid Death (water) and Zipline (supply chain/drone delivery). Stripe (fintech) is also on the rumor list, but in February there was a takeover offer that gave employees a payout, which likely eased some of the pressure on the company to go public. As mentioned, Viking filed an initial application last week. Barron estimates it could have a market value of $10 billion or more. This could go public in early May. Valuations Still a Problem A big problem last year, particularly for tech-focused VC-backed companies, was declining valuations. The Forge Private Market Index, an index that tracks the performance of 75 actively traded private companies, fell 44.3% in 2022 and another 20.2% in 2023. However, with an increase of 3.7%, it is now at its highest level since mid-October this year. “As IPOs gain traction, buyers are returning to the private market,” Howe Ng, head of analytics and investment solutions at Forge, told me. “Renewed enthusiasm is responsible for some of the recent valuation increases in private technology stocks.” Even as markets have reached new highs, the specter of rising interest rates still looms over the IPO market. “I'm a little worried that the market is pricing in more rate cuts than we're likely to see, and if that sentiment changes based on upcoming inflation data, Fed comments, etc., I'm still worried there's a wet blanket “We're going to be thrown back into the IPO market,” Rainmaker's Martin told me. However, most IPO watchers prefer to look on the bright side. “Interest rates are clearer, although inflation is more stubborn than expected, but in general.” [rates are] “It is expected to slide lower,” Santosh Rao of Manhattan Venture Partners told me.
Comments are closed.