IPO market quickens as stocks hit record highs during H1 2024, EY says

Dive Brief:

U.S. initial public offerings raised $17.8 billion during the first half of this year, 75% more than the same period in 2023, as investor confidence rose, IPO valuations improved and equity prices hit record highs, EY said.
The number of U.S. IPOs increased 27% during the period to 80 compared with 63 during H1 2023. The share price of companies that went public on average rose 16.3% during the first day of trading and 23.9% from the date of listing until June 17, the final date for the data in EY’s research.
In contrast, the number of IPOs worldwide fell 12% during the period, with valuations sinking 16%, EY Global IPO leader George Chan said. “The global IPO market reflects the broader economic backdrop, while seeking new balance amid geopolitical and election complexities,” he said in a statement, noting “that the pendulum of opportunity” favors Western economies.

Dive Insight:

The worldwide IPO market in coming quarters faces possible turbulence from intensifying regional conflicts, the uneven pace of monetary easing and “an election super-cycle,” EY said, noting that more than 50% of the world’s population generating nearly 60% of global gross domestic product goes to the polls this year.

Election outcomes “may prompt changes in government spending, debt levels, interest rate policies, currency strength and global supply chains,” EY said.

Executives considering an IPO often look favorably on the post-election period. U.S. IPO activity in the years after an election on average exceeds the rate during an election year by 39%, EY said.

“Companies in sectors that are heavily regulated, or highly reliant on government policies, may encounter heightened volatility during and after election periods,” EY said, cautioning executives considering an IPO to monitor elections for the potential impact on stakeholder interests. They should, “if necessary, reevaluate their IPO strategy and timing.”

During the first half of 2024 the value and number of U.S. IPOs, although increasing, did not meet expectations given that the Standard & Poor’s 500 index hit a record high and volatility was comparatively low, according to Shari Mager, KPMG’s U.S. capital markets readiness leader.

“We expect there to be some slowdown in the summer, but a very good window to go public should open in September,” she said in a statement, predicting that more IPOs will come to market in the fall.

U.S. mergers and acquisitions also rose during the first half, increasing to $801 billion or 34% more than the same period last year, KPMG said.

As with IPOs, however, the total did not meet expectations, according to KPMG.

“It’s clear that there wasn’t the return to deal-making that many were hoping for at the start of the year,” Carole Streicher, head of deal advisory and strategy at KPMG U.S., said in a statement. A decision by the Federal Reserve to keep borrowing costs “higher for longer” and a persistent mismatch between the prices offered by sellers and favored by buyers inhibited M&A, she said.