Graphic: US IPOs set to extend recovery after staging a solid comeback

Guardian Pharmacy Services

26/09/2024 19:41

(Adds Thursday's market debuts in paragraph 5)
    By Niket  Nishant and Manya Saini
       Sept 26 (Reuters) - The U.S. IPO market has bounced back
strongly in 2024 after a nearly two-year dry spell, driven by
receding recession fears and a searing rally in stocks.
    Still, investor preference for companies with a clear path
to profitability has kept enthusiasm in check, with analysts
expecting a recovery to take roots next year.
    "Right now, (the IPO market recovery) is very sober and
clinical," said Mike Bellin, IPO Services Leader at PwC U.S.,
citing the election uncertainty and doubts about the Federal
Reserve's ability to guide the economy to a soft landing.
    "As we get more momentum and alleviate some uncertainty, we
may move into a market where investors are willing to put more
money in riskier IPO candidates."  
    On Thursday, shares of weight-loss drug developer BioAge
Labs  BIOA.O  opened 25% above their IPO price. Natural gas
producer BKV  BKV.N  and healthcare firm Guardian Pharmacy
 GRDN.N  both climbed 3% at the open. 
    Below are some graphics outlining the state of the IPO
market:
    
    STRONG DEBUTS
    Companies that raised at least $100 million in their IPOs
this year have traded up about 25% on average, according to data
from Renaissance Capital, with first-day gains of 16%.
    The Renaissance IPO Index  .FTIPOUSA , a benchmark for
broader trends, is up about 14% so far this year.
    Social media giant Reddit  RDDT.N , logistics heavyweight
Lineage  LINE.O  and healthcare firm  Concentra  CON.N  are
among the firms that went public this year.
    
    
  
    
    BIOTECHS SHINE
    September has turned out to be the busiest month for
healthcare IPOs this year, Dealogic data showed, a contrast from
risk-averse investors moving to the sidelines as biotechs
struggled with dried-up funding due to high interest rates. 
    "Biotech is a very capital-intensive business," said Ross
Carmel, partner at securities law firm Sichenzia Ross Ference
Carmel. 
    "Access to the public markets gives them the opportunity to
continue raising capital as they need it, faster than they would
as a private company."
        
    
  

    POSITIONED FOR ACCELERATION 
    While IPOs have recovered from the lows of last year, the
proceeds raised via such sales are well below the 10-year
historical average, according to Renaissance Capital.
    "The August sell-off, stubbornly high inflation and anxiety
surrounding the upcoming election likely deterred a number of
potential issuers weighing fall IPOs," said Angelo Bochanis,
data and index associate at Renaissance. 
    Heightened investor scrutiny could also have prompted some
startups to delay a listing until they were on a stronger
financial footing. 
    "We've seen a change in the scale required to go public. If
you back up five years, a typical IPO-bound company had $100
million in annual recurring revenue. Nowadays, it's probably
double that, if not more," PwC's Bellin said.
    Still, next year may bring more activity.
    "We are anticipating a steady recovery, and plenty more
names will go public in the coming months," Renaissance's
Bochanis said. 
    
    
    ARTIFICIAL INTELLIGENCE
    "Anything AI-related should have an easy story to tell and
investors love a good narrative when they're seeking new
opportunities," said Dan Coatsworth, investment analyst at AJ
Bell.    

    But investors will likely seek more concrete evidence of the
advantage of AI to the business model.
    "The buy side today is very diligent around AI matters.
There will be good questions asked," said PwC's Bellin. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global X Artificial Intelligence & Technology ETF outperforms
the benchmark S&P 500    https://tmsnrt.rs/3BgwpxM
Opening day snapshot: How recent U.S. IPOs fared    https://tmsnrt.rs/3TEONqs
Top 10 U.S. IPOs of the year: Almost all trading higher    https://tmsnrt.rs/4ehY7c0
US IPOs in 2024    https://reut.rs/3zxf6rA
Biotech IPOs recover after summer lull    https://reut.rs/3XYsiyY
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Niket Nishant and Manya Saini in Bengaluru;
Additional reporting by Manas Mishra; Editing by Sriraj
Kalluvila and Alan Barona)
 ((Niket.Nishant@thomsonreuters.com))