IPO Insights Q3 2023
Building winning deal stories
Taking a company public can boost its profile and provide much-needed capital resources. But ensuring readiness for the capital markets requires a keen understanding of the current IPO market—significant exits, sectors on the rise, trends in deal prices, sizes, returns, and more.
IPO Insights delivers the latest information and analysis on quarterly IPO activity and performance. Prepared by professionals from the KPMG Capital Markets Readiness and KPMG Private Enterprise practices, this quarterly report is designed to help private market business leaders prepare their companies to tap into the capital markets.
Positive but cautious
Despite high hopes and an increase in activity, the IPO market remained cautious in 3Q. The number of IPOs was up slightly at 30 vs 23 in 2Q, and total proceeds rose from $6.6 billion to $7.8 billion. Tech and healthcare were back in the mix, and VC saw its biggest deal count since 1Q22.
The quarter saw three big tech listings come to market, led by the UK’s Arm (which raised $4.8 billion), U.S. grocery leader Instacart ($660 million), and SaaS company Klaviyo ($576 million). Among healthcare stocks, RayzeBio raised $311 million, enjoyed a 33.3 percent pop, and ended the quarter up 23.3 percent overall. The six biggest deals of the quarter all enjoyed pops of 9 percent or more, including a first-day jump of nearly 25 percent for Arm—but they couldn’t maintain momentum. Instacart popped at 12.3 percent and then ended the quarter down 1 percent. Arm eked out a 5 percent return. As an anticipated opening of the IPO window, the quarter lacked confidence.
Highlights of 3Q23
- 30 IPOs raised a total of $7.8 billion with seven $100+ million listings
- Tech stocks dominated the tables, led by listings from Arm, Instacart and Klaviyo
- VC tested the waters with two of the three biggest offers in the quarter
- Public company valuations may be starting to level out
- Activity may remain muted until mid-2024
This wasn’t the big bang that investors were hoping for, but it does help build a foundation for markets to fully reopen in mid-2024. Yet much has changed in the past few quarters and old IPO plans need to be refreshed. As such, we’re seeing many private companies now getting very focused on making sure they are taking the steps necessary to go to market once the IPO window opens a bit wider.
Shari Mager
Partner and U.S. National Leader, Capital Markets Readiness, KPMG LLP
US IPO Activity - Quarterly
Tech and healthcare push on the window
Tech stole the headlines with three big listings in just one week. The sector raised a combined $6.1 billion across nine listings in total, mostly small- to mid-cap stocks. Klaviyo and Arm ended up being the 3rd and 5th best-performing IPOs overall, with returns of 15 percent and 5 percent, respectively. Ultimately, however, the small caps weighed the sector down, delivering a dismal -25.3 percent return on the quarter.
The healthcare story was similar, also bringing three $100 million-plus deals to market. Apogee Therapeutics and RayzeBio delivered the best results of the quarter, returning 25.3 percent and 23.3 percent, respectively. But others went south quickly. Turnstone Biologics raised $80 million and then lost 67 percent on the quarter. Sagimet Biosciences’ $85 million raise swooned 45 percent. Overall, the sector also fell deeply negative, posting a -21.3 average return. All other sectors were largely influenced by the fortunes of just one or two small-cap listings.
US IPO Returns - Average 3Q 2023 Returns by Sector
VC tests the waters
Venture capital came back into the market this quarter with eight new listings for a combined $2.3 billion, including tech unicorns Instacart and Klaviyo and a handful of sizable biotech stocks. Instacart and Klaviyo both listed at discounts to their last valuations.
Private equity brought just one listing to market this quarter, consumer brand ODDITY, which had a good first day pop of 35.8 percent before dropping 19 percent on the quarter.
While the IPOs in the quarter did not blow the window open, they did perhaps set some valuation expectations. Those seeking to optimize those valuations in future IPOs will clearly need to have a history of, or a very clear path to, profitability.
Conor Moore
Partner and head of KPMG Private Enterprise in the Americas
US IPO Activity – Venture Capital
US IPO Activity – Private Equity
Future trends
1
IPOs at down rounds
With a net -31.9 percent return posted by the quarter’s crop of IPOs, valuations remain well below the highs of late 2021. And while many investors feel that they may be nearing bottom, that won’t help companies who may be forced to take down-rounds in the near future. Private company leaders will need to think carefully about how they tap into capital over the short and long-term.
"There is a feeling that private company valuations may now be aligning with those of public companies. I think that gap narrowed further in the third quarter. And the more IPOs that happen, the more investors can conclude whether valuations are starting to come into alignment or not."
- Shari Mager, Partner and US National Leader, Capital Markets Readiness, KPMG LLP
2
Outlook for 4Q23
Expectations may have been too high, as results from this quarter were probably not enough to fully open the IPO window. That likely means markets will remain fairly quiet for the next quarter or two, with companies continuing to test the waters while investors react to a series of economic and geopolitical news over the coming months. Rather than a bang, the opening of the markets may more closely resemble rolling thunder—a series of successes over the fourth quarter could go a long way to opening markets in early 2024.
"Clearly, there are a handful of sectors that are getting lots of attention—particularly generative AI companies. But, at this point, what investors are really looking for are companies with predictable and profitable business models, regardless of the industry. For investors, the only thing worse than no IPOs is a bunch of bad IPOs."
- Conor Moore, Partner and head of KPMG Private Enterprise in the Americas
Source (for all market commentary and data cited on this page): Renaissance Capital US IPO Market 3Q 2023 Quarterly Review
How KPMG can help
Understanding the key trends and investor expectations is critical to preparing for an IPO. Investment narratives matter. They cut through the deluge of data and analysis, and help companies sift real windows of opportunity from market noise. And the most compelling deal stories come from insights about a company’s unique mix of valuation drivers. Sector. Markets. Customers. Portfolio mix. Capital structure.
At KPMG, our professionals offer a range of services specifically designed to help privately owned companies—venture-backed or otherwise—navigate each stage of the IPO journey. We help entrepreneurial ventures simplify the complex challenges of going public, while helping ensure they meet their diverse regulatory, compliance, and reporting requirements.
Working with KPMG, you gain access to trusted advisers who share your entrepreneurial mindset. And we can help you understand and improve the factors that drive maximum deal value for your offering.
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