IPO Market Recovery Could ‘Take Some Time’

So far, 2024 has been something of a mixed bag for high-profile IPOs.

The initial public offering (IPO) market flagged in 2022 and 2023, and Wall Street had hoped this year would offer a turnaround. But as Bloomberg News reported Sunday (Feb. 4), two of this year’s three biggest public listings have underperformed.

First there’s Amer Sports, whose products include Wilson tennis rackets. It raised $1.37 billion with its IPO — the largest public listing in the U.S. since October, but priced at $13 per share, underneath its proposed range.

Days earlier,  BrightSpring Health Services raised $693 million from selling shares while also pricing them below a marketed range — and slid 15% in its opening day of trading.

These debuts, the report argues, indicate a distance between what companies are offering and what investors want to support, an inversion of the way IPOs are meant to work at a time when stock benchmarks are at historic highs.

“There’s no doubt that you get some knock on effects — good or bad — from the last deal that can impact the next deal and how you place expectations related to pricing,” said Gareth McCartney, UBS Group AG’s global co-head of equity capital markets. “It can be a tactical and sentiment-driven market, so each deal does have an impact on the next one.”

The report added that some of this trouble could be residual pain from the mixed performance of IPOs last year. However, Bloomberg says its data shows that so far this year, companies have raised $8.3 billion across 64 share sales, a sign that activity hasn’t completely stopped.

“Investors have the ability to be selective across every variable, but the good news is that they are communicating early and often on what is working for them,” Seth Rubin, head of equity capital markets at Stifel Financial, told Bloomberg.

“We are continuing to rebuild — this recovery is going to take some time, and people are looking at everything on a deal-by-deal basis.”

This year has seen some high-profile companies weigh IPOs, while others have called them off. In the latter category, car maker Renault last week said it was calling off plans to take its electric vehicle business public, saying that “current equity market conditions” were not right for an IPO.

Meanwhile, social media platform Reddit is reportedly planning to go public in March, with potential investors pushing the company to seek a listing price of $5 billion.