The US IPO market is showing signs of recovery, with fundraising expected to reach a new high since September last year this week

According to the Zhitong Finance and Economics APP, the U.S. initial public offering (IPO) market is expected to receive a boost this week, with a fundraising scale of up to $5.5 billion, which may mark the beginning of a recovery that investors have been eagerly anticipating during the downturn in new stock listings. Temperature-controlled storage and logistics company Lineage is set to conduct an IPO of nearly $4 billion this week, making it one of the liveliest new stock offerings since September last year.

Tech companies that are growing faster than their listed peers no longer have typical "survival" IPOs, as these companies attract private funding and avoid the scrutiny of issuing new shares. Therefore, bankers and American entrepreneurs hope that this latest trend in the IPO market will provide some momentum.

Paul Abrahimzadeh, Co-Head of North American Equity Capital Markets at Citigroup, said, "From the perspective of growth IPOs, the number of companies waiting to go public in the third quarter is much lower than we expected." "Although the IPO market is opening up and trading volume is increasing, it lacks the sustained momentum we hope to see."

In addition to Lineage, Concentra Group Holdings Parent Inc., a subsidiary of Select Medical Holdings Corp., and OneStream Inc., under private equity giant KKR (KKR.US), are also set to go public this week. If all goes according to plan, this series of IPOs will raise a total of $5.5 billion, the highest level since the $5.9 billion raised in the week of Arm's (ARM.US) listing in September last year.

The size of U.S. IPOs in the first half of 2024 remains below the pre-pandemic average level

Paul Abrahimzadeh said, "If all goes well, September will be Citigroup's highest revenue month and likely the highest revenue month on Wall Street as a whole. Some companies originally planned to go public this summer, but postponed their listings to September to complete their IPOs before the U.S. election."

However, Jeremy Abelson, Founder and Portfolio Manager of Irving Investors, stated that the lukewarm IPO market has led to a paradigm shift for investors and the private companies that make up their portfolios. He noted that the days of evaluating short-term gains before stock prices return to normal levels are gone.

Jeremy Abelson said, "This is a transformative different dynamic that started 6 to 12 months ago. We often talk to our portfolio companies, and what they expect is not a premium, but more acceptance of valuations that may be moderate or discounted until these companies become a validated public market asset with multiple successful quarterly reports." This shift has led some companies, including cloud financial platform OneStream, to lower their ambitions. The company is seeking a market value of $4.4 billion in its IPO, lower than the $6 billion valuation in 2021 financing.

Bankers unanimously believe that the decline in public market valuations, coupled with unpredictable trading schedules, has made predicting trading activities more difficult, which may encourage companies to postpone their listing to next year. This is especially true for those who can leverage private investors or have healthy balance sheets, making it relatively easy to delay going public.

Paul Abrahimzadeh said, "If a company's board of directors is not happy with the absolute P/E ratios of its listed peers, the decision is to wait. This has led to many IPOs this year being postponed to 2025." As investors have recently shifted from large tech stocks to small caps, Wall Street is eager to see some improvement in IPO activity continue into the typically quieter August.

However, looking at the overall situation this year, despite the still relatively sluggish IPO market, the U.S. IPO market has raised over $22 billion so far, an increase of over 60% from last year. A series of IPOs this week may increase the size of IPOs for the full year of 2024 by around 25% compared to last year. Daniel Polsky, Co-Head of William Blair & Co., said, "People will focus on this series of IPOs in July to see how they are priced and traded, as a representative of current investor sentiment."