US IPOs to pause after raising $1B in five weeks

Initial public offerings in the US are poised to take a breather, with volume expected to snap a solid run of five consecutive weeks with more than $1 billion raised.

Last week’s first-time share sales, led by electric vehicle maker Zeekr Intelligent Technology Holding Ltd.’s $441 million offering, capped the longest streak of $1 billion-plus weeks in nearly three years, according to data compiled by Bloomberg. The deal flow adds to signs that the US IPO market has turned a corner after two years of anemic volume.

While the likes of Goldman Sachs Group Inc. Chief Executive Officer David Solomon and New York Stock Exchange President Lynn Martin have flagged optimism about the pace of recent listings, they have cautioned that it may be more of a steady stream than a tidal wave through the end of 2024.

“I don’t think this summer is going to be gangbusters busy, but there are going to be a few offerings that will serve as important barometers for the health of the IPO market,” said Paul Abrahimzadeh, Citigroup Inc.’s co-head of equity capital markets for North America. 

Last week’s $1.03 billion raised on US exchanges was the least since the first week of April, the data show. The calendar reflects external factors such as listing hopefuls whose applications were filed last year will shortly need to update their financial results with fresh numbers. 

“We had a little bit of a lull, but that just coincides with corporate earnings windows and financial statement staleness,” said John Kolz, head of US equity capital markets for Royal Bank of Canada. 

Games Global Ltd. requested to withdraw its IPO registration on Monday, citing current market conditions, according to a filing. The listing, which was set to raise as much as $275.5 million and to start trading Tuesday, would have been the only sizable US IPO this week.

RECEPTIVE ENVIRONMENT

With $7.2 billion raised via US IPOs in the quarter to date, 25% more than in the same period last year, and a warm reception from investors, companies considering going public are facing the most welcoming conditions in months.

Five of the 32 offerings priced this quarter sold more shares than they had announced, and three priced above their respective marketed price ranges, Bloomberg data shows. The companies making their debuts in this crop saw their shares increase an average of 17.5% since their listings.

“This most recent wave is a very positive indicator,” said RBC’s Kolz. “Investors showed up and followed through in the after-market. That gives us a lot of confidence to go out and advise our clients that the IPO market is a very viable path right now.”

The second quarter is likely the longest IPO window this year, given the lack of public and school holidays, and the US presidential election potentially weighing on the calendar.

Temperature-controlled storage and logistics giant Lineage Logistics is targeting a valuation of more than $30 billion, and is expected to lead a crop of private companies going public for the remainder of the quarter, people familiar with the matter have said. Vista Equity Partners-backed automotive data and software services provider Solera is also targeting an offering as soon as in July, Bloomberg News reported earlier, citing people familiar with the situation. 

“The September window could be very active in particular for private equity-backed tech companies — across both the services and software sectors,” said Citigroup’s Abrahimzadeh. “Some high-profile, high-growth unicorns — who have been waiting patiently until now — may end up aiming for that last window between Thanksgiving and year-end depending on how the market trades post-election.”