By Greg Sichenzia

It’s difficult to determine who is watching the IPO market closer: investors or startups.

From a high level, the consensus appears to be that with interest rates set to recede at some point in the first half of 2024, coupled with the resiliency of the U.S. economy and recent GDP and inflations numbers, the IPO market is back in business.

Nasdaq CEO Adena Friedman recently explained while at the Consumer Electronics Show that close to 100 companies have recently filed confidentiality with the SEC for initial public offerings and plan to list on Nasdaq — suggesting a major rebound for the IPO market.

But those of us who work with new issuers on a near daily basis know: This IPO market will not be like the ones of the past five years.

Gone are the days where a company could slap “ESG,” “cryptocurrency,” “artificial intelligence” or “EV” on its website and instantly raise tens, if not hundreds, of millions of dollars in private and public offerings.

H1 2024 expectations

Let’s start with some of the drivers and trends beyond just falling interest rates.

First, interest rates don’t just mean “cheap money” for startups and emerging tech companies. They also mean that the CDs and Treasury notes where retail and institutional investors parked their money the past two years will no longer yield 5%-plus. Investors who did so were smart, and they’ll be smart again — meaning it will be time to withdraw those assets and place them elsewhere, creating even more opportunity for issuers and underwriters to attract shareholders.

Further, some of the largest public companies in the world, such as Nvidia, Microsoft and, until a few weeks ago, Tesla, have all thrived lately, placing the market at all-time highs. Investors are happy and will take those same profits and start hunting for high-growth opportunities in IPOs.

Without delving too much into politics, some investors and banks are so convinced that former President Trump will win, they’re placing bets on more deregulated capital markets. There is always a push and pull between Democratic and Republican candidates, with the former advocating for tighter regulations that have the potential to slow capital markets activity, while the latter seeks to create a more friendly environment for issuers and underwriters.

That’s not to say each bank or company raising capital believes this, but it is a constant theme in the market feedback we receive.

The biggest trend we’re seeing in the U.S. IPO market right now is more mature companies seeking to go public. Reddit, a brand that has been around forever and rumored to go public several times, is a prime example. Another is Amer Sports, which makes Wilson tennis rackets, and is targeting a valuation of up to $8.7 billion for its U.S. initial public offering.

Many people, including me, believe this deal will be a bellwether event for the IPO market, and that if successful, we may see a cascade of offerings quickly follow.

Lastly, the U.S. economy’s ability to not just avoid recession but to actually grow is resulting in international companies seeking exposure to U.S. capital markets.

We are seeing this in many regions of the world, particularly Southeast Asia and parts of Europe where revenue-producing, high-growth technology and consumer brands are thriving. Companies there see the U.S. as the right venue for liquidity events, and thus are engaging banks to help them raise capital.

It’s important to remember that all of this can change at any moment. Concern over when interest rates will fall has already led to some volatile trading days and hesitant IPOs in 2024.

I predict we’ll see a number of companies quietly test the waters these next couple months, and that Q2 will be when we really see filings and listings pick up. Until then, stay tuned to Fed guidance, inflation and job reports, and exciting companies seeking exposure in the U.S.’ resilient stock market.

Greg Sichenzia, a founding member of Sichenzia Ross Ference Carmel LLP, counsels public and private companies in all securities laws matters. He has also been responsible for structuring innovative M&A transactions. Throughout his career he has represented many companies and investment banks in IPOs of securities, and has represented numerous public companies in private equity financing transactions (PIPEs) and the resulting resale registration statements associated with these financings.

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Illustration: Dom Guzman