IPO hopes rise for new year after Fed's early holiday gift
By Pablo Mayo Cerqueiro
LONDON (Reuters) -Bankers advising companies on stock market listings are hopeful that the new year will bring a recovery in initial public offerings after the U.S. Federal Reserve signalled it may start reversing the fastest escalation in interest rates in decades.
«The IPO markets will be much better in 2024 than they were this year, and my gut tells me that both volumes and breadth of access will progress as we move through the year,» said David Ludwig, global head of equity capital markets (ECM) at Goldman Sachs.
That positive call comes after a tough year for bankers. So far, this year stands to be the second-worst for ECM transactions in the last decade after 2022, with $532 billion raised to date, according to Dealogic data.
For IPOs, in particular, 2023 has seen the lowest levels of activity in since 2016.
Some of those that listed this year saw their share prices drop in the aftermarket, including chipmaker Arm Holdings (NASDAQ:ARM) and sandal maker Birkenstock (NYSE:BIRK).
Many of those stocks are now trading above their issue price, amid a global rally in equities fuelled by growing consensus that interest rates have topped out.
Markets are currently pricing in around 160 basis points of interest rate cuts from the Fed next year, while investors also think U.S. economy will avoid a major recession — both expectations reinforced by the latest economic data.
«There is a clear understanding that we are, at worse, at a pause in the increase of interest rates and, at best, at the beginning of what could be a decline of interest rates,» said Stephane Boujnah, CEO of European stock exchange group Euronext. This would prompt investors to shift assets from bonds to shares, he said.
The positive
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