(Bloomberg) -- Companies itching to go public face a tough choice as the fall IPO window opens: take the leap with markets near all-time highs, or wait until next year when risks around interest rates and the U.S. election have faded.
The window, roughly the nine-week stretch from Labour Day until the Nov. 5 vote, will likely be the last chance this year for a clutch of the best-prepared companies. Initial public offering bankers and advisers expect the election will freeze activity globally, putting a damper on IPO volume, which is unlikely to overtake last year’s even after bouncing back in the first half from the post-pandemic lull.
First-time share sales outside mainland China have raised US$69 billion so far this year, 50 per cent more than in the same period in 2023, data compiled by Bloomberg show. The current figure is barely more than half the average in the decade before the pandemic, however.
Marquee listings like Viking Holdings Ltd.’s $1.8 billion New York debut and Galderma Group AG’s $2.6 billion offering in Zurich have performed well in the after-market, as global equity benchmarks sit on the doorstep of record highs. The MSCI All Country World index hit an all-time high Friday and is up 15 per cent in the year to date. Yet many long-touted IPO candidates have stuck to the sidelines amid disagreements with investors over valuation, as well as concerns that risk tolerance for new issues hasn’t fully recovered.
In the U.S., the backdrop of markets is “still pretty constructive,” according to Clay Hale, co-head of equity capital markets at Wells Fargo & Co.
“My expectation is the companies that choose to go public following the Labor Day holiday into Christmas are going to be best-in-class businesses that have done a lot of testing the waters meetings,” Hale said in an interview.
Arnaud Blanchard, Morgan Stanley’s global co-head of ECM, sees appetite from the buy side continuing to improve, as long as candidates fit the criteria investors are looking for, such as growth profile, scale and quality.
“We haven’t had a demand problem but a supply problem,” he said. “The appetite of large mutual funds, hedge funds and sovereign wealth funds to deploy capital into the U.S. market remains strong.”
U.S. Federal Reserve Chair Jerome Powell’s declaration at Jackson Hole that the time has come for policy to adjust will help remove any lingering worries about the direction of travel for interest rates.
“The fact that interest rate cuts begin to commence and that we can see a series of rate cuts that will last over time is important,” said Jeff Bunzel, global co-head of Deutsche Bank AG’s ECM business. “That will encourage people that the interest rate sensitive sectors will begin to have some relief from the level of higher rates that we’ve had, but it will take some time for that to work its way through.”
Post-Labour Day
A handful of U.S. companies have live filings and could be among the crop moving ahead with IPOs after the Sept. 2 Labour Day holiday. They include semiconductor maker Cerebras Systems and Vista Equity Partners-backed automotive data firm Solera Corp., Bloomberg News has reported. Mexican carrier Grupo Aeromexico SAB, and BKV Corp., a producer of natural gas owned by Thai coal and power producer Banpu Pcl, are among the companies that have filed or updated their filings in the U.S. recently.
Some have already approached the finish line and pulled back. Ticketing firm StubHub put off a planned IPO launch until after the summer at the earliest, Bloomberg News reported in July.
Others are exploring so-called dual track processes, weighing options including first-time share sales and potential M&A deals. Aircraft maintenance service provider StandardAero and health-care technology firm Zelis are among those considering strategic options, Bloomberg News has reported.
Don Duffy, president of capital markets advisory firm ICR, said some firms are lacking a sense of urgency to try to sneak in ahead of the Nov. 5 election.
“We’re having a lot of conversations with companies, and they’re aiming for 2025 instead,” he said in an interview.
Whatever considerations affect the timing, it isn’t for want of good candidates, according to UBS Group AG.
“The IPO pipeline for the balance of the year and 2025 is both high quality and sizeable,” said Tommy Rueger, the Swiss bank’s global co-head of ECM.
Europe election fallout
The global market whipsaw in August came too late in the summer to disrupt any IPO calendars, but the same can’t be said for the turmoil unleashed on Europe by the French election.
Sneaker maker Golden Goose Group SpA and Spanish bakery firm Europastry SA were among those shelving debut plans in June after French President Emmanuel Macron called a surprise vote, sending volatility spiking. Though IPOs in the region have raised some $16 billion through Aug. 23, a 53 per cent increase from last year’s showing, the rest of the year is likely to slow.
Much like their U.S. counterparts, investors and companies are waiting for interest rate cuts to spur more activity, according to Dinesh Banani, a London-based partner at Herbert Smith Freehills.
“The outlook for continental Europe is similar to the U.K.’s, and the more relaxed interest rate environment should help the IPO pipeline on the continent,” Banani said in an interview.
Partners Group Holding AG is weighing a launch of the initial public offering of German metering company Techem GmbH as soon as September, Bloomberg News has reported.
It joins other would-be issuers eyeing the September window. CVC Capital Partners Plc-backed Polish retailer Zabka Polska SA and Springer Nature, an academic publisher that counts BC Partners among its backers, are both considering second-half listings, people familiar with the matter have said.
“There are some large sponsor-backed assets that may look to IPO if the equity investment would be too large for a private equity buyer,” said Christopher Mort, global co-head of capital markets at Freshfields, based in London. “There is also a backlog of tech and health-care companies backed by venture capital.”
Greater China slump
While IPO proceeds in the rest of the world have risen versus last year, those in greater China are on pace to slump for a third year in a row, data compiled by Bloomberg show. Companies there have raised nearly $13 billion in 2024 so far, down three quarters from the same period last year.
Tighter regulatory controls and economic malaise have deterred Chinese firms from listing, while geopolitical tensions have prompted some international investors to scale back bets on Hong Kong stocks.
“The numbers have been one step forward, one step back,” Kenneth Chow, Citigroup Inc.’s Asia head of ECM products and execution, said of the country’s economic readouts. “The market would like to see the property market stabilize and more pro-growth government policy to boost consumption.”
A handful of Chinese issuers have returned to U.S. markets with sizable new listings after a multi-year drought, providing a degree of optimism.
“Many Chinese companies still want to list in the U.S. and we are working on a few of those IPOs,” said Citigroup’s Chow.
To Udhay Furtado, Citigroup’s Asia head of ECM origination and solutions, “everyone is gearing up for 2025” with the final three months of the year “a bit of an unknown.”
There’s one thing most bankers in Asia agree on, however: India is the region’s IPO market to watch.
The country has seen strong debuts including e-scooter maker Ola Electric Mobility Ltd. and baby-products retailer Brainbees Solutions Ltd., both of which have traded more than a third above their IPO price. Bankers are now eagerly awaiting a listing from Hyundai Motor Co.’s Indian unit that could raise as much as $3.5 billion and is expected as soon as September, Bloomberg News has reported.
“The story this year, and into the end of the year, is India,” Furtado said.
With assistance from Julia Fioretti, Pablo Mayo Cerqueiro, Amy Or and Dave Sebastian
©2024 Bloomberg L.P.
