Top executives from the biggest banks on Wall Street express confidence in the revival of the initial public offering (IPO) market, driven by successful listings from entities like Reddit Inc. and Galderma Group AG, which have significantly increased underwriting profits.
Globally, companies launching IPOs in the first quarter managed to raise $27.8 billion, marking a 10% increase from the previous year, as per Bloomberg's collected data. This surge in activity and the strong performance of these companies in the early stages of trading are providing a much-needed boost to the industry, which has seen a decline in equity capital markets activities leading to widespread job cuts.
Goldman Sachs Group Inc. (GS, Financial)'s chairman and CEO, David Solomon, commented during the bank's first-quarter earnings call that we are witnessing the early phases of a resurgence in capital market openings, with the initial months of 2024 showing a revitalization in the market for new issues.
Similarly, Citigroup Inc. (C, Financial) CEO Jane Fraser shared an optimistic outlook during the bank’s earnings call, noting a cautious reopening of the IPO market in the second quarter, spurred by better market valuations.
The IPO market began its recovery sporadically in 2023, with a few significant listings raising hopes for a swift rebound. Recently, the flow of deals has begun to show signs of steadiness.
In the U.S., notable deals have seen their stocks trading above IPO prices. Astera Labs Inc. saw its shares nearly double following its $820 million March IPO, while Reddit's shares surged up to 92% post its $860 million IPO before stabilizing. UL Solutions Inc., with a $946 million IPO earlier this month, has seen over a 20% increase in its stock price.
In Europe, Galderma's IPO stands out as the largest of the year, raising $2.6 billion in Zurich and currently trading around 19% above its IPO price, contrasting last year's high expectations and subsequent disappointments from listings like Arm Holdings Plc, which has now more than doubled.
JPMorgan Chase & Co. (JPM, Financial) CFO Jeremy Barnum noted on the bank’s earnings call that while some IPOs had previously underperformed, this quarter has seen a significant improvement in IPO performances.
Despite the optimism, some banking leaders urge caution. Morgan Stanley (MS, Financial) CEO Ted Pick remarked that the recovery would be gradual, with investors showing impressive interest in high-quality recent IPOs, steering clear of the speculative ventures common in the SPAC era.
