Offers are rebounding as the upcoming US election creates opportunities and risks.
The U.S. IPO market is showing renewed momentum as the 2024 presidential election approaches, with investors and analysts focused on potential opportunities ahead. Last week was the busiest period for IPOs since February, with four out of five companies successfully pricing themselves, raising a total of $1.1 billion.
This resurgence comes after a long period of stagnation, sparking belief that the market is turning a corner.
“In the past, after big corrections like the 2000 dot-com bubble or the 2008 financial crisis, it took several years for IPO volume to recover, even if the general stock market was on the mend. We’re seeing a similar pattern now, with increased IPO activity, but a full recovery will take longer,” said Joseph B. Cordell, an IPO expert at the University of Florida. said academic Jay Ritter.
Among the most high-profile IPOs last week were medical technology company Ceribell and biotech company Upstream Bio, highlighting the dominance of life sciences in IPO activity. Ritter points out that life sciences accounted for 30% of all IPOs since 2013, even though many companies in this space are still in the early stages and generating minimal revenue. do.
“Life science companies are not household names, but they maintain a steady presence,” Ritter says. “The fundamentals of these companies are strong even as the market recovers.”
Impact of elections on market sentiment
In the IPO market, attention is also focused on the US presidential vote in November. Historically, volatility is a hallmark of election years, but it also offers potential benefits as investors anticipate policy changes that could spur growth. This dynamic, combined with the stock market’s strong performance, has many companies considering IPOs to capitalize on the current momentum.
“With the S&P 500 and Nasdaq at record highs, many companies feel the timing is right for an IPO,” Ritter said. “Private equity firms have sensed the momentum in this market and are keen to exit their investments.”
Although the IPO market is still nascent, it remains selective and not all companies are successful. Another biotech company, Camp 4 Therapeutics, struggled to price its products, reflecting investors’ more cautious approach.
“Today’s valuations are more grounded in reality,” Ritter said. “Investors are still willing to pay for growth, but are expecting more established business models, especially in the biotech space where timelines are long and uncertain.”
Timing is the key to service
Ritter said market sentiment drives IPOs more than economic indicators, but the market still needs to keep an eye on interest rates and inflation. But Ritter believes these macro factors could take a backseat to improving market sentiment and provide a stronger tailwind for IPO activity, especially as recession fears recede.
“There is an opportunity for companies considering an IPO,” Ritter said. “But timing will be key as they look to capitalize on new momentum in the market while navigating potential volatility ahead.”
International companies, particularly European ones, could also help sustain U.S. IPO activity, with the U.S. likely to remain a fundraising hub despite ongoing geopolitical tensions.
The US IPO market is showing signs of recovery, but the market remains selective and businesses need to remain cautious as the uncertainty from the election may persist for some time after Election Day on November 5th. There is. Now you have confirmed that you are not ghosting the source into your copy.
