IPO Insights Q1 2024
Perspectives on the quarter’s market trends
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, and 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.
Better, not best: IPO markets slowly build
The first quarter of 2024 didn’t quite bring the avalanche of fresh IPOs investors had hoped for. And while the headline data was good, it wasn’t quite enough to shove the IPO window open. Instead, the quarter continued to build on a strong foundation—setting the stage for an IPO boom once the macroeconomic stars align.
Our count indicates that IPO volume in the US rose by 24 percent over 4Q23. Gross proceeds jumped 133 percent to US$7 billion, largely on the back of a few larger issuances. Of the five biggest issuances, returns held up well. But the vast majority of other IPO companies this quarter (around 78 percent of them) ended the quarter below their opening price.
While recent economic data suggests high interest rates will persist for longer than many anticipated, there are strong signs that IPO markets are ready for a surge once interest rates start to fall. The timing is tight; if interest rates don’t fall over the summer, the upcoming election will keep the lid on the IPO markets well into 4Q24.
Highlights of 1Q24
- 36 US IPOs raised a total of US$7 billion in the quarter, led by Amer Sports (US$1.4 billion), Reddit (US$748 million), and Astera Labs (US$712 million).
- Amer Sports’ 21.6 percent return on the quarter helped lift the overall Consumer & Retail average sector returns to 8 percent.
- Private Equity (PE)-backed IPO volume dropped by two-thirds but total proceeds raised increased significantly.
No. of IPOs(a)(b) and gross proceeds (US$B)
The below data includes 3 direct listings closed during 1Q22-1Q24; No direct listing was reported in 1Q24
There are a lot of eyes on the IPO market right now. Hopefully we see a couple of successful IPOs in 2Q24 and then others follow on. If that happens, I expect we will start to see Venture Capital firms (VCs) loosening their purse strings, in part because their limited partners (LP's) will start putting pressure on them to invest.
Conor Moore
Global Head, KPMG Private Enterprise
Winners and losers: Bigger does better
The big news of the quarter was the long-awaited listing of Reddit, a social media platform, for nearly US$750 million in late March. The day before, technology company Astera Labs raised US$713 million. Both enjoyed encouraging first-day pops. Reddit got a 33 percent pop and ended the quarter up 5 percent. Astera Labs saw a 46 percent pop and finished the quarter up 41 percent.
Consumer and retail (C&R) performed well with two of the three offerings ending the quarter up by more than 20 percent. C&R also boasted the largest IPO of the quarter—Amer Sports—raising US$1.37 billion and rising 21.6 percent over the quarter.
The healthcare sector brought the most deals to market and raised a combined US$2.4 billion. While average returns were -18 percent on the quarter, analysts expect the healthcare IPO market to rebound this year due to strong industry fundamentals, innovation, R&D, AI and favorable regulations.
With the five biggest IPOs of the quarter raising more than US$500 million each (versus just one in the final quarter of 2023) and four of the five receiving a positive response from the markets, the activity of this quarter suggests that big IPOs can still float in an uncertain macroeconomic environment.
While valuations continue to remain low, I think we’re still seeing a lot of hesitancy and misalignment around private company valuations. The key is to be able to tell a really good equity story that is based on strong balance sheets and proven profitability.
Shari Mager
Partner and U.S. National Leader, Capital Markets Readiness, KPMG LLP
IPO performance in 1Q24 by sectors
PE takes another pause
After a busy quarter in 4Q23, PE owners took another pause, with PE-backed IPO volume down by around a third in 1Q24. In fact, overall PE exit volume dropped by 26 percent in 1Q24 (year-over-year)—largely consistent with 4Q23. Overall exit value was up, largely on the back of two major private exits by Leonard Green & Partners (for US$18.2 billion) and T. Rowe Price (for US$16.5 billion).
Many PE leaders say they anticipate a resurgence in exit activity this year, driven by a backlog of maturing investments and the potential for reverse mergers to boost IPO opportunities. However, we also observe a notable uptick in the shift towards so-called “continuation funds” that allow PE managers to prolong the exit timeline on maturing portfolio companies.
PE exit activity(a)
Future trends
1
The IPO pipeline: Confidence and cancellations
The IPO pipeline is full—our count suggests 235 companies are currently in the active pipeline. Yet cancellations are also up. In fact, in 1Q24, we counted 46 new IPO announcements and 20 cancellations.
In some cases, particularly in highly regulated industries, this comes down to the practicality of keeping the prospectus fresh. But it may also signal a weakening in confidence as private market executives and founders watch newly listed competitors’ listings sag.
The 235 companies in the pipeline are the ones that believe they are ready to go as soon as the markets return. Once that happens, we expect there will be a second wave that quickly follows. They should be getting ready.
2
GenAI: Automating the trade process
Clearly, investors are keen on Generative AI (GenAI) as an asset. But GenAI is also enhancing the way capital markets operate, not just in obvious areas like customer experience, but also trickier fields like providing enhanced fraud and compliance management. We’re seeing leading players pilot AI in the front office and investment process, in their strategy and management oversight forecasting, in their reporting and compliance, and in their trade operations.
While no specific rules and regulations exist against frauds due to usage of GenAI, the SEC is warning firms to enhance and standardize disclosures and put an active priority against AI-washing and green-washing.
3
SPACs
The special-purpose acquisition company (SPAC) landscape is evolving. In January, the SEC adopted new rules and amendments that update the disclosure requirements, increase transparency related to projections, and reclass de-SPACs as traditional IPOs. The rules come into effect on July 1, 2024, and should help address any information asymmetries.
4
Outlook
The prospects of a big bang opening of the IPO markets in 2024 are looking increasingly long. A few successful IPOs in 2Q24 would certainly help build momentum. But much will depend on how soon and how steeply interest rates start to fall.
The situation can change quickly. And some predictions suggest that, even in a pessimistic scenario, IPO volumes could rise quickly. Private market companies with an eye to a public exit should be prepared.
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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