- Following Nextracker’s successful listing, other renewable energy companies are planning to go public in the US, including Tel Aviv-based Enlight. JPMorgan is lead advisor on both deals.
- Favored sectors include green energy, thanks in part to the Anti-Inflation Act; Biotech companies with promising drug studies; Retail brands, which have held up well in the current environment, and parts of the financial sector such as insurance, bankers said.
- Waiting in the wings are companies like delivery giant Instacart, payment processor Stripe, Fortnite owner Epic Games, sportswear retailer Fanatics and digital banking provider Chime.
- Instacart could be listed as early as mid-year, according to a banker with knowledge of the situation. However, with Stripe, management could pursue options to stay private longer, the banker said.
Traders work on the floor of the New York Stock Exchange on Wall Street in New York City.
Angela Weiss | AFP | Getty Images
Wall Street just completed its biggest IPO in four months, giving bankers hope that the market for newly listed company shares is springing to life.
Solar technology company Nextracker raised $638 million by selling about 15% more shares than expected, sources told CNBC on Wednesday.
The listing, which began trading Thursday, shows the stock market’s rebound this year is reviving appetites for new companies among mutual fund and hedge fund managers, said Michael Wise, vice chairman of equity capital markets at JPMorgan Chase.
Wall Street’s so-called IPO window, which allows companies to easily attract investors to new stocks, was mostly closed for the past year. IPO proceeds plummeted 94% last year to the lowest level since 1990 as the US Federal Reserve hiked interest rates. The upheaval eliminated a key fee generator for investment banks in 2022, prompting industry-wide layoffs and forcing private companies to lay off workers to “extend their runway.”
Private companies expand their careers by stretching their budgets—usually by cutting expenses, such as B. Employees – to avoid raising capital or going public until market conditions improve.
“The window seems to be ajar right now,” Wise told CNBC in a phone interview. “Strong market performance since the beginning of this year has investors and issuers back and engaged; many companies are now undergoing pre-IPO testing-the-water processes.”
After Nextracker’s listing, bankers say other renewable energy companies plan to go public in the US, including Tel Aviv-based Enlight. New York-based JPMorgan is lead advisor on both deals.
According to Andrew Wetenhall, co-head of equity capital markets in America, Morgan Stanley is also seeing “higher investor engagement in launching IPOs” than during most of last year.
Morgan Stanley, JPMorgan and Goldman Sachs are three of the top listing advisors worldwide, according to Dealogic data.
But the market is not open to everyone. The prospects of unprofitable companies have hurt investors, and many tech listings from 2020 and 2021 are still underwater.
Favored sectors now include green energy, thanks in part to the Anti-Inflation Act; Biotech companies with promising drug studies; retail brands that have held up well in the current environment; and parts of the financial sector such as insurance, bankers said.
The common theme is that newly listed companies need to be profitable, in sectors that are doing well, or at least not particularly vulnerable to rising interest rates.
“This market is opening up, it’s not wide open,” Wetenhall said. “The parties that should do business in this environment likely have a number of characteristics that align with current investor sentiment.”
A major test of the market looms as Johnson & Johnson has filed to list its Kenvue consumer health unit public, continuing a trend of IPOs led by spinoffs. That’s because Kenvue’s implied market cap is over $50 billion and investors are hungry for bigger listings, according to one banker. That listing could happen as early as April, another banker said.
Other companies are waiting in the wings, including delivery giant Instacart, payments processor Stripe, Fortnite owner Epic Games, sportswear retailer Fanatics and digital banking provider Chime.
Instacart could be listed as early as mid-year, according to a banker with knowledge of the situation. However, with Stripe, management could pursue options to stay private longer, this banker said.
A broader return to IPO listings is unlikely to happen until the second half of the year at the earliest, particularly for most tech and fintech names, which are still generally unpopular.
“Tech was very quiet,” said another banker, who declined to be identified, to speak frankly. “I think it’s going to take a while for that to recover.”
Comments are closed.