The IPO market should pick up in 2024. Here are the hottest companies set to make their debut
After a tepid year in the IPO market, investors are hopeful 2024 will bring about a return to form. 2020 and 2021 were record years for offerings as low borrowing rates bolstered investor interest in startups such as Rivian Automotive, Robinhood and Snowflake . But the IPO market cratered in 2022 after the Federal Reserve’s aggressive rate hiking campaign collapsed investor demand for growth stocks. Take Rivian , for example. In 2021, the electric truck maker opened above $106 per share in its first trading day , as investors piled into the startup backed by the likes of Amazon and Ford . It has since tumbled to trade around $15 per share. But happier days could be ahead for the IPO market in 2024. The companies that debuted last year were met with mixed reception, but investors are hopeful that Fed rate cuts anticipated later this year will mean an uptick in IPOs, and eventually pave the way for a recovery in dealmaking activity. According to Linqto’s 2024 IPO Sentiment Survey released Thursday, only a little more than half, 52%, of 2,500 traders polled are anticipating a significant recovery in the IPO market this year, suggesting “cautious optimism” ahead. “There’s a lot more optimism for the IPO market,” said Akshata Bailkeri, head of research at EquityZen, a platform for pre-IPO activity. “2023 definitely was a very different kind of environment. With the raising rates, and what was happening on macro and geopolitical levels, obviously, there weren’t that many IPOs and companies willing to IPO.” “But I think we’re coming to 2024 on a much stronger footing,” Bailkeri said. The power in consumer brands In the past, the IPO market was saturated with tech offerings, venture-capital backed firms out of Silicon Valley that touted software-as-a-service offerings. Many expect that will continue, especially as artificial intelligence gains in importance as a theme, starting with robotics and automation startups. But the hottest IPOs this year could be in consumer companies, with both Shein, the Chinese fast-fashion giant, and Amer Sports, the maker of Wilson tennis rackets, declaring ambitions to go public. These companies can take advantage of names that retail investors readily recognize to generate buzz around an IPO. “Knowing the brand name provides some accessibility in how people may view the company and the IPO,” EquityZen’s Bailkeri said. “So, that’s potentially a lens to which they’re considering, ‘Okay, people know us, they know what we do, they know what our business model is, and what we’re offering to the public.'” “It’s easier to build excitement around familiar products that people use day in and day out,” Bailkeri added. Here are some companies that could go public in the coming year. Shein Late last year, Shein confidentially filed to go public, preparing for a debut that could happen as soon as this year, CNBC reported. The Chinese fast-fashion retailer was last valued at $66 billion, though that could change. “We don’t know exactly where Shein is going to decide to value itself, but there’s talk about it going potentially a little bit higher than that current $66 billion valuation,” Bailkeri said. “So it’s an interesting story there.” To be sure, Shein also faces increased scrutiny from the U.S. lawmakers given its ties to China, and has faced accusations of violating labor laws. Reddit Another major market debut would be from social media platform Reddit. This week, Reuters reported the discussion forum platform is planning to launch an IPO in March , an endeavor that would have been in the works for three years. Reddit filed confidentially for an IPO in 2021. Back then, it was valued at roughly $10 billion. Reuters, citing sources, reported the firm will sell roughly 10% of its shares in its IPO, and will settle on a valuation as it nears its debut. Fanatics Fanatics, the American maker and retailer behind licensed sportswear for the National Football League, Formula 1 and other properties, is another consumer company that’s declared his ambitions to go public. Recently, the firm announced Andrew Low Ah Kee, formerly the president of online real estate platform Opendoor Technologies and operating chief of GoDaddy , as chief executive over Fanatics Commerce. In his previous roles, Low Ah Kee pushed the businesses into new markets and brought on new partners. It’s the sort of appointment EquityZen’s Bailkeri noted a company makes when it’s expanding its C-suite to prepare for a public debut . It’s familiar turf for Low Ah Kee. While at Opendoor, the company made its public debut in 2020 through a special purpose acquisition company, or SPAC. This year, Opendoor shares are trading far below their offering price, with the stock down another 34% so far in January. Skims Skims, the shapewear brand co-founded by Kim Kardashian, also recently appointed Andy Muir as chief financial officer. Muir comes to Skims from Nike , where she worked with the Jordan Brand. Other consumer names that have declared their public ambitions include Amer Sports, the company behind Wilson tennis rackets, is seeking a $1 billion IPO by the end of January, according to a Reuters report this week citing sources. Liquid Death , a canned water company, and Golden Goose , a sneaker company, are reportedly also possible IPO contenders in 2024. To be sure, how companies perform may depend in part on how resilient the consumer is in 2024, cautioned Roxanna Islam, head of sector and equity research at VettaFi, a data analytics company. Instacart’s parent company Maplebear , for example, was met with a poor reception last year, falling more than 7% in 2023. It’s up by 9% so far in 2024. ‘Sustainable profitability’ Of course, companies now have more options to raise funds outside of a traditional IPO, which some investors say could also limit IPO markets going forward. For example, companies that want to stay private for longer could explore a potential sale, or tap into secondary markets. In fact, Troy Gayeski, chief market strategist at FS Investments, pointed out data from the U.S. Census Bureau and World Bank that show the percentage of public companies have dropped 35% since the mid-1980s, while the percentage of private companies have jumped by 43% over the same time period. At the same time, only 4% of U.S. companies are public, underscoring the opportunity in private markets, Gayeski said. “Ultimately, why do you go public? You need capital to grow your business, right, that is the motivation,” Gayeski said. “But if there are both private equity investors and private credit lenders, not only do you not have to source equity capital from public markets, you don’t have to source debt capital from public markets.” As it is, companies looking to make their debut this year will find the market starkly different from how it was just a few years ago, when many companies overpromised on what they could deliver. Experts caution investors give greater consideration to startups with solid balance sheets, healthy growth expectations and client relationships, as well as the proper management teams in place. In other words, companies will have a higher bar to clear, and will have to defend their valuations, in world with higher interest rates. “We’ve sort of gotten away from that high reward — short term, high reward — seeking behavior,” said VettaFi’s Islam. “I think we’re looking more towards companies that have sustainable profitability.” Still, how IPOs perform this year may ultimately have to do with how the first movers perform, as their reception may indicate how followers will do. “When one goes really well, that kind of leads to several others,” said EquityZen’s Bailkeri, adding, “That’s kind of what we’d be looking for.”
