On Friday, investors took further heart from a 21 per cent debut gain for EQT-owned Galderma, which also priced its shares at the top of its range. The Swiss dermatology giant raised SFr2b (US$2.2b) in the biggest European float since Porsche’s debut two years ago.
A sustained reopening of the IPO market could boost dealmakers’ animal spirits more generally as well as ease strains on private equity firms who typically rely heavily on IPOs as a means of exiting investments. One banker described the success of the Galderma deal as “a sigh of relief” for private equity.
Deal flow, however, is likely to be more of a steady stream than the flood seen in the last boom, which ended early in 2022.
“There is fundamental demand from investors but only at the right price and for companies with good stories,” said Achintya Mangla, JPMorgan’s global equity capital markets head. “To build a really good foundation for the IPO market, we still need to see this year’s IPOs perform three, six months out.”
Since 2021, when companies sold shares worth US$154b in the US as the wider market roared higher, IPOs in New York have raised only a combined US$36b, according to Dealogic data. Deals have been smaller too, raising an average US$151m, less than half the US$388m of 2021.
Confidence in the potential for IPOs has been helped by the recent market rally. The benchmark S&P 500 has climbed 19 per cent in six months, while volatility — a threat to would-be floats — has remained low. This week the Federal Reserve lifted its economic growth outlook, adding to investor confidence that corporate profits could continue to grow.
“To move forward with an IPO, management have to be confident in the economic backdrop and the expected performance of their business — that confidence is starting to improve ‚” said Eddie Molloy, co-head of Americas equity capital markets for Morgan Stanley.
Companies expected to go public soon include cold storage chain Lineage Logistics, which is seeking a valuation above US$30b, and cyber security provider Rubrik, valued at US$4b last year.
Healthcare payments software group Waystar filed publicly for an IPO in November, but ultimately held back.
Listings expected soon in Europe include Permira-backed Golden Goose, the Italian luxury sports shoe brand, and Puig, the Spanish beauty and fashion group behind brands including Charlotte Tilbury.
Bigger US prizes down the line include Nvidia-backed software group Databricks, valued at US$43b in a funding round last year and payments group Stripe, worth about US$50b.
Investors have so far shown the most interest in more mature companies which are profitable, or can convince would-be buyers that they will be soon.
David Ludwig, global head of equity capital markets at Goldman Sachs, said investors were still being careful over valuations.
“The amount of time they are spending with quality companies ahead of potential listings is constructive,” he added.
“Companies need to show growth and a path to profitability. Investors are very willing to deploy capital, but they’re still very disciplined and they’re providing us with very detailed valuation thoughts,” said Keith Canton, Americas head of equity capital markets at JPMorgan.
Preparing to go public takes several months, meaning companies only just starting the process could at best debut in the autumn. If there is volatility around November’s US presidential election, that could push some into 2025.
“If the market remains constructive, it will pull more companies into the IPO process,” said a senior specialist. “We’ve been expecting a gradual reopening in 2024 and then if activity continues to accelerate, we will head into 2025 with a deeper pool of companies and a more normalised IPO market.”
Financial Times
