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Navigating the 2024 IPO Market Landscape

The following was originally published as the foreword to Initial Public Offerings 2024 by Global Legal Insights.

Healthy equity markets are the bedrock of the economy, and capital raised through, for example, new issues of publicly offered equity securities or the initial public offering (IPO) market, is direct evidence of a healthy economy in which new businesses can flourish. Likewise, existing businesses most often seek to access a larger pool of public capital to allow for the next stage of growth.

The IPO Market in 2023

Though a silver lining of the COVID-19 pandemic was to produce golden years for capital markets in 2020 and 2021, we have witnessed a reversal in the last two years. US IPOs (excluding SPACs) closed out 2023 with a total of $20.1 billion in deal value, versus $156.6 billion in 2021, a decline of 86.9%1. SPACs all but disappeared with $3.8 billion in value versus $162.6 billion in 2021, a decline of 97.6%2 .

The IPO market’s continued weakness was a result of several factors, including the demise of SPACs and geopolitical uncertainty (such as the conflicts in Ukraine and Gaza). Higher interest rates set by the US Federal Reserve were an important macroeconomic contributor. These rates were raised seven times in 2022 and four more times in 2023 for a total of 525 basis points, resulting in a federal funds rate range of 5.25–5.50% – a 23-year high.

And yet, those hopeful for market revival saw some initial indications of recovery to set the stage for a restored market when comparing results from 2023 against those from 2022. For example, total proceeds for traditional IPOs in 2023 grew by more than 130% from about $8.5 billion in 20221 . In addition, the highest-valued IPO of 2023 (Arm Holdings’ $5.2 billion offering) closed higher at the end of the first quarter of 2024 as compared to its IPO price in the fall of 2023.

For 2023, the S&P 500 had a 24.2% return as compared to a decline of 28% in 20223 , which was its worst year since the 2008 financial crisis. In sum, equity markets overall were on an upward trend throughout the year.

Looking Forward

So, what does 2024 hold for capital markets? Rising interest rates, persistently high inflation, and recession fears all contributed to a challenging equity market backdrop in 2023, but the first quarter of 2024 has already seen improved US IPO activity. In addition, we saw a significant increase in proceeds from IPOs by foreign private issuers in the first quarter of 2024 as compared to the first quarter of 2023, signaling potential momentum for more high-profile global businesses to raise capital in the US IPO market.

Looking beyond 2024, market trends and their potential impacts, including congressional budget brawls, upcoming presidential elections and conflict in Ukraine and Gaza, also bear consideration. As expectations around valuation stabilize after the pandemic pop and overall after-market performance of IPOs improves, and if inflationary and interest rate factors are abating in 2024, it is possible that the markets could settle into a new normal, and the backlog of a deep pipeline could result in an influx of deals.

Author

Joe Corcoran is a Managing Director and Associate General Counsel in the Capital Markets Group at SIFMA.

Footnotes

  1. Dealogic as of April 18, 2024. Includes SEC Registered IPOs. Excludes BDCs, SPACs, ETFs, CLEFs & rights offers. [↩] [↩]
  2. Dealogic as of April 18, 2024. Incudes SPACs only. [↩]
  3. Bloomberg as of April 18, 2024. [↩]

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