THE pricing of Lineage’s US$4.4 billion first-time share sale helped make last week into the busiest for United States initial public offerings (IPOs) in two and a half years. That excitement will be short-lived, according to bankers, who predict the rest of the summer will be more subdued.
There was US$6.1 billion worth of IPO activity in the US last week, according to data compiled by Bloomberg. Levels were boosted by temperature-controlled storage giant Lineage’s upsized offering and KKR-backed software company OneStream’s pricing above its marketed range to raise US$490 million.
It was the busiest week of IPO activity since the week of Dec 6, 2021, when US$8.1 billion was raised, beating even the week in September when companies including Arm Holdings raised US$5.9 billion in total, data compiled by Bloomberg show.
But there is not much to fuel this momentum, with no sizeable IPO in sight until after Labour Day.
“IPO activity is likely to be more muted to August,” said Rob Stowe, head of Americas equity capital markets at Barclays. “But the five or six weeks after Labour Day should be a fairly active window if the market holds.”
Bankers have to pen in IPOs during September and October, ahead of potential volatility through the rest of the year pegged to the US presidential election. The last two months of the year will be opportunistic in nature, they said, for issuers who want to raise capital before the year’s end – assuming the market allows.
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“My gut is, it gets quiet,” said Becky Steinthal, head of technology, media and telecom equity capital markets at Jefferies Financial Group. “Many companies had their eye on the beginning of ‘25, that seems to be pushed back six months.”
If IPOs slow down as predicted, companies’ follow-on offerings and investors’ secondaries sales will likely take centre stage, as companies come out of earnings. Already, private equity firm Thoma Bravo priced the sale of US$2.7 billion worth of Nasdaq shares Monday, in the fourth-largest sale of shares in an already-public company this year.
Steady path
IPOs in the US have been on a steady path to recovery, with US$28.4 billion raised so far this year. That’s almost double the volume for the same period in 2023, even though the level of activity is still below the pre-pandemic average.
Last week’s four sizeable IPOs were particularly encouraging to market players. Three – Lineage, OneStream, and Latam Airlines Group – traded up on their first day, even against the backdrop of a tech sell-off where the Nasdaq 100 Index lost US$1 trillion in market value. Lineage is holding 7 per cent above its IPO price, despite the offering size being 20 per cent larger than originally intended.
It’s encouraging to see interest in IPOs hold up despite last week’s rotation out of large-cap tech and into smaller stocks, said Barclays’ Stowe.
OneStream was the best-performing of the four that listed last week. It jumped 34 per cent on its debut, lifting its valuation to a tad over US$6 billion, or above the last valuation mark it received in a 2021 funding round. The stock continued to move up, to nearly 40 per cent over its offer price during Monday trading.
“OneStream was priced conservatively compared to close peers, and it was an IPO down-round, but clearly that paid off,” said Matthew Kennedy, senior strategist at Renaissance Capital. “That is the type of performance that will bring back investors and issuers to the IPO market.” BLOOMBERG
