![]() Public semiconductor firms have benefited from investor enthusiasm for artificial intelligence, which is trained using their chips. He adds that the market can see more defensive companies, companies with positive cash flow, and companies in industry-specific areas like semiconductor manufacturers-such as Arm, whose processors have landed in many Apple AAPL products over the years. Kennedy says he expects more IPO activity from companies in the biotech, consumer goods, and restaurant industries. “The bottom line is a lot of the macro variables that are needed for the IPO market are coming into the right place, and a very elevated backlog of companies are waiting to go public,” explains Amoroso. Strong returns in the stock market-which is up 17.3% as measured by the Morningstar US Market Index since the start of the year-is also a critical piece of the puzzle. “We’ve made quite a bit of progress on that front as the recession gets pushed further and further back,” says iCapital chief investment strategist Anastasia Amoroso. At the same time, widespread expectations of a recession have faded. With investors expecting the Fed will wind down its interest rate increases, volatility in the stock market has abated, which makes for a friendlier environment in which to bring new companies public. Standford says that if they had gone public, they could have ended up with at most half of the funding they needed.Ĭentral to the improved backdrop for IPOs is the outlook for the economy and Federal Reserve policy. But as the bear market took hold in 2022, names like the car-sharing company Turo canceled or delayed their IPOs. In 20, the IPO market attracted hordes of investors with the debuts of technology startups valued over $1 billion (also known as “unicorns”) and hype around special purpose acquisition companies like WeWork WE. Additionally, they all too often prove overpriced and end up being dead money (at best) for years. However, they come with the risk of being untested in public markets, where performance standards differ significantly from those of private companies. They have a place in the portfolios of investors who want to supplement seasoned equities with new stocks. IPOs can present the opportunity to buy shares in some of the most exciting growth companies. “There is a large backlog of companies that should be awaiting an IPO, but I don’t think they will rush through the door because there is still so much uncertainty in the market.” Read More: Will Investors Find Birkenstock's IPO Price Uncomfortable? Improved Backdrop for IPOs “Because venture capital-backed IPOs have traditionally been money-losing companies, it’s going to be a challenging start to an IPO market reopening until some momentum can build,” says Kyle Stanford, lead venture capital research analyst at PitchBook, Morningstar’s private market data and analysis arm.
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