The following study was authored by Christine Short, VP of Research at Wall Street Horizon.
- The past 18 months have been an ice age for investment bankers brokering deals and young entrepreneurs looking to tap additional capital
- Several successful IPOs recently could benefit the upswing for companies looking to trade in the secondary markets
- While credit markets remain tight and fears of a global economic slowdown linger, there are signs that some significant companies could go public in the coming quarters
According to Wall Street Horizon data, the second quarter of 2023 was the seventh consecutive quarter of lower IPO activity compared to a year earlier. The April-June period was the weakest global number of IPOs since early 2016. Capital markets remain dry as lending rates continue to rise, and last March’s regional bank riots did investment bankers and ambitious young private companies a disservice. There are reasons for bulls to hope, however, and we’ve already seen a rebound in the M&A world.
The second half of the year could see an uptick in IPOs and a sprinkling of social proof due to the AI boom, leading to some new companies testing the waters of the secondary market. That will be a key theme to watch in the coming months, but the bears can counter with the real threat of a global growth slowdown now looming into early 2024. Let’s take a look at some recent companies that have gone public and what they might be up to halfway through the year.
An IPO freeze-out since the second quarter of 2022
Cautious capital markets
It has been more than two years since the Wall Street bubble peaked. In early 2021, there were hot startups and speculative SPACs that raised huge amounts of investor money and then enjoyed high initial returns on capital. Many predicted the euphoria would not last, but strong IPO activity continued throughout 2021 and even into the early weeks of last year. Over the past 18 months, however, it has been a rare sight to watch a NYSE specialist orchestrate a successful trade open for a new IPO company. Is this trend changing? Based on the latest findings, our team assumes that this is possible. A flurry of new IPOs has kept Wall Street bullish, and more IPO activity could come later in 2023.
A handful of new companies attracted positive financial media coverage in the past quarter:
Kenvue: This was the first significant company to go public this year, and shares are up more than 20% after the May 4 open, proving that despite so much macro jitter, a strong start is possible. The sale of J&J continues to be a success for attributed KVUE shares, which are up 15% through early July. The consumer health company operates worldwide and offers self-care and skin health products as well as well-known brands such as Band-Aid and Listerine. The $48 billion consumer staples company signaled to the street that capital markets were healthy enough for a renewed bout of primary and secondary market activity. Looking ahead, the second quarter earnings date is set and confirmed for the BMO on July 20th.
CAVA Group (CAVA): Following Kenvue’s successful IPO, the company, which is about a tenth its size, nearly doubled in size on its debut. It was the shadows of 2021 again when the humble Mediterranean restaurant chain entered the market. Though the stock has been volatile since its first day of trading on June 15, it’s still up around 80% compared to its asking price. While not yet profitable, CAVA is now valued higher than Wendy’s, Shake Shack, and even Papa John’s. Early buyers are hoping that more strong gains are on the way.
Saver Value Village (SVV): June 29 was unofficially the day of the NYSE IPO as three companies rang their respective opening bells. The SVV was the winner of the trio. The Washington-based second-hand goods retailer appears to be in a good position given continued trade-down activity by American consumers. SVV was a leveraged buyout firm backed by private equity firm Ares Management and it was a solid exit, with shares trading at $18 and then a Day 1 bid above $23. received dollars.
Kodiak Gas Services (KGS): Another private equity portfolio company was not as successful on June 29. KGS, a $1.2 billion small-cap in the energy sector, is trading about flat through July 7 compared to its IPO price, but until the small oil and gas company’s IPO, there was at least one sign that the IPO market is gaining momentum.
Fidelis Insurance (FIHL): The Last of the Three Friends is a Bermuda-based reinsurance company that faces macroeconomic challenges should there be a global growth slowdown in the second half of the year. After falling 7% on debut, shares are back down to zero levels relative to the market price.
Some 2023 IPO winners: Kenvue, CAVA, Super Value Village
What to look out for
Looking ahead, don’t expect the IPO market to see a flood of new listings in the coming weeks. Historically, July and August tend to be weak months for IPO activity. However, there is optimism that there will be a pick-up in equity supply over the last four months of the year. While it may not be a floodgate scenario, the increased number of companies testing the waters of the secondary market is a small sign of hope.
Keep an eye on Arm, a major international semiconductor company that could go public with an estimated valuation of nearly $50 billion. You may recall that Nvidia took action against Arm Holdings in September 2020 – a proposed deal that was scrapped over antitrust concerns by regulators.
The other major public stock offering could be via Stripe, a global payments processor that’s been going through some rough patches lately. The San Francisco and Dublin-based financial services company has recently downsized its workforce and is biding its time given the high level of uncertainty in the technology space.
Other companies that may be ready by prime-time IPO include Reddit, Instacart, Chime, Discord, and Panera. One more thing: we will watch what happens in China. Late last week there were signs that regulatory measures against companies based in that country might be eased. Could we see some prominent Chinese companies testing IPO?
The conclusion
The IPO market is part art and part science. Emerging companies and even some established companies want to ensure that there is sufficient demand for their shares before investing their shares in the secondary markets. Private equity firms, meanwhile, are always on the lookout for green shoots that signal their investments are paying off, and investment bankers are always striving to underwrite quality deals. As the IPO situation turns somewhat more bullish after the lack of activity, investors should stay tuned for the latest major events in newly listed companies.
For more information on the data included in this report, please email: [email protected]
Wall Street Horizon provides institutional traders and investors with the most accurate and comprehensive forward-looking event data. Covering 9,000 companies worldwide, we offer 40+ types of corporate events through a range of delivery options, from machine-readable files to API solutions to streaming feeds. By keeping clients informed of critical market-moving events and event revisions, our data enables finance professionals to capitalize on or avoid the resulting volatility.
Christine Short, VP of Research at Wall Street Horizon, focuses on releasing research on Wall Street Horizon event data on 9,000 global stocks in the market. Over the past 15 years in the financial data industry, her research has been featured on numerous financial news outlets, including regular appearances on networks such as CNBC and Fox to cover corporate earnings and the economy.
Twitter: @ChristineLShort
The author may hold positions in the securities mentioned. All opinions expressed herein are solely those of the author and in no way represent the views or opinions of any other person or entity.
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