Stock Market Gains Pave Way for IPO Resurgence in 2023
The stock market is experiencing a resurgence in initial public offerings (IPOs) after a challenging year in 2022. So far this year, 55 IPOs have been secured, raising a total of $9.7 billion in proceeds, according to IPO tracker Renaissance Capital. These numbers show a significant improvement compared to last year when 71 companies went public, raising $7.7 billion. However, it is worth noting that the current IPO activity still falls below the historical average of 150 to 200 companies going public each year.
Matt Kennedy, senior strategist at Renaissance Capital, expects a gradual and continued recovery in the IPO market in the second half of the year, gaining momentum leading up to 2024. While this year may be slower in terms of business, Kennedy predicts that 2024 will resemble a more average year in terms of IPO activity.
The rebound in IPOs can be attributed to the resilience of the stock market, which has seen the S&P 500 rise by approximately 19% so far this year, a stark contrast to last year’s 19.4% loss. This stock market recovery has been supported by the economy’s ability to defy recession predictions, with the labor market showing resilience and the Federal Reserve raising interest rates to combat inflation.
Traders in the market are also betting on the Federal Reserve ending its rate hikes after this month, as it is expected to raise rates one final time. This perception has contributed to the market rally.
Despite the lower IPO numbers, investors in companies that went public last year have seen significant returns. Higher stock market valuations have allowed companies to go public at higher prices, ultimately benefiting investors.
Several companies that recently went public have witnessed substantial returns. For example, restaurant chain Cava Group’s shares have more than doubled since its market debut on June 15, surpassing its IPO price of $22 per share. Similarly, GEN Restaurant Group has seen a return of 57.7% from its IPO price since it debuted on June 28.
In conclusion, the stock market’s recent gains have provided a favorable environment for an IPO resurgence in 2023. While the number of IPOs is still below the historical average, the stock market recovery and positive investor returns signal promising growth in this sector. The gradual recovery is expected to continue in the second half of the year and gain momentum leading up to 2024. Nonetheless, it is crucial to closely monitor market conditions and investor sentiment in the coming months.
