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Turning the tide: Global IPOs look for a rebound in 2024

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The outlook for global IPO activity in 2024 is improving as interest rates stabilize and stock market valuations rally after a challenging 2023

Focusing on signs of recovery

Global IPO markets endured a difficult 2023 in the face of rising interest rates and geopolitical uncertainty. But after a challenging 12 months, the outlook for IPO activity in 2024 is brightening

This past year has been one of the most challenging years for the global IPO markets since the 2008 global financial crisis.

Rising interest rates constrained liquidity, investors were cautious and choppy stock market valuations caused potential IPO candidates to put their listing ambitions on hold, hoping that market conditions would improve.

Regulatory changes are also a concern. For example, the US Securities and Exchange Commission has recently adopted new climate-related disclosure rules for listed companies. While these rules have been stayed pending judicial review, issuers worry that this type of rulemaking will increase compliance costs and discourage some companies from pursuing IPOs.

However, there have been some bright spots. India took center stage as one of the world's most active stock markets for new listings due to its thriving domestic economy. In the second half of 2023, the US stock exchanges showed renewed promise with a limited number of high-profile, cross-border listings. Moreover, London and Hong Kong forged ahead with changes to listings frameworks that will open up new opportunities when markets rebound.

There are signs that a rebound in IPO volume is in the cards for this year, with interest rates peaking and stock markets around the world rallying during the early months of 2024. There have already been 290 IPOs globally in Q1 2024, with a combined deal value of US$23.02 billion.

Although interest rates remain elevated and geopolitical risk continues to loom large, there is a building sense of confidence among investors, advisers and companies that after a challenging year, better days lie ahead for IPOs in 2024 and beyond.

Market overview: The global IPO landscape

Rising interest rates and geopolitical uncertainty put the brakes on new IPO activity across global markets in 2023. However, after a challenging period, the outlook for IPO activity in 2024 is improving

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Ready to launch: US stock markets are poised for a strong 2024

US IPO markets have been lackluster during the past 24 months, but, as interest rates stabilize and stock valuations recover, the backdrop for US IPOs in 2024 is improving

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Changes ahead: London market is ready for reform

Stakeholders across London's capital markets are ready to seize the opportunity to reform and reenergize IPO activity in one of the world's most important financial centers

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Coming of age: A strong year for India’s capital markets

India's stock exchanges saw more IPOs than any other jurisdiction, as its strong domestic economy buoyed markets

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Resilience and reform: Hong Kong adapts to change

Hong Kong is adapting to changes amid challenging times

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Building a pipeline: Will Brazil emerge from its dry season?

After a dry spell, the pipeline of Brazilian IPO candidates is showing signs of filling up again

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Bright spots: Sweden and CIS present opportunities after a challenging 2023

After a slow 12 months, issuers and investors in Sweden and the CIS are hopeful that their IPO markets can punch above their weight in the year ahead

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Challenges remain but IPO outlook brightens

Global IPO markets have had a comparatively positive start to 2024 after a challenging year. Investors and IPO candidates hope that stable interest rates and pent-up demand will support an increasing flow of IPO activity in the months ahead

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Building a pipeline: Will Brazil emerge from its dry season?

After a dry spell, the pipeline of Brazilian IPO candidates is showing signs of filling up again

Insight
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4 min read

We expect Brazilian public markets to take center stage in 2024, as hopes remain that this will be the year that South America's largest economy breaks its IPO drought.

There have been no IPOs in Brazil since 2021, when fertilizer manufacturer Vittia Fertilizantes e Biologícos made its public market debut in Brazil and Brazilian fintech company Nubank successfully listed on the New York Stock Exchange.

The year leading up to those listings had been one of the best ever for Brazilian IPO activity, with IPO proceeds in 2021 totaling US$14.73 billion, a five-year high and almost double the US$8.47 billion raised in 2020.

However, since then, Brazil's IPO market has been closed. The Brazilian Central Bank—Banco Central do Brasil—moved aggressively in 2021 to tackle rising inflation, pushing interest rates higher and faster than its counterparts in Western markets. In turn, higher interest rates raised capital costs, deterring IPO candidates from proceeding with listings.

In addition to interest rate headwinds, a close and unpredictable presidential election in late 2022 also put investors and issuers on the back foot as the market awaited the outcome.

With IPO activity failing to revive in 2023, the dearth of IPOs in Brazil since 2021 represents the longest dry spell in two decades, according to Bloomberg.


Ready for a revival

Moving into 2024, bankers, issuers and investors are hopeful that Brazil's IPO hiatus will end.

Brazil's proactive approach to hiking interest rates as soon as inflationary pressures started building allowed the Brazilian Central Bank to begin reducing rates as early as August 2023, a move that may lure IPO issuers back to the market if the pace of reducing interest rates continues as hoped. A 25 percent rise in the Bovespa—the country's main stock market index—during the past 12 months (until the end of Q1 2024) has provided additional tailwinds for potential IPOs.

Investment bankers and advisers are optimistic that the improving underlying fundamentals may lead to IPOs in Brazil, particularly once the interest rates in Brazil fall below 10 percent. In turn, investors may begin to seek higher returns in the equity capital markets and reduce their fixed-income exposure. According to the B3 stock exchange, more than 100 Brazilian companies are preparing for IPOs, while bankers at Itaú BBA, a leading Brazilian investment bank, are forecasting that proceeds from IPOs and other share issues in Brazil could reach between R$50 billion and R$70 billion (US$10 billion to US$14 billion), according to the Financial Times.

Companies from a variety of sectors, ranging from infrastructure to retail and technology, could launch IPOs in 2024, according to Bloomberg. And while the momentum behind IPOs grows, investors remain pragmatic and sensitive to risk. A recovery in Brazilian listings will be contingent on interest rates in the US stabilizing and coming down, and steady global growth. Investors are also likely to be more selective this time around, preferring both larger offerings that provide greater liquidity and companies that have established track records of positive results. Thus, it may take until Q3 2024 or later for anticipated IPOs to proceed.

However, the opportunity to support Brazilian IPOs does present investors with attractive upside potential. Brazilian equities were among the strongest performing emerging market stocks in 2023 and still present an attractive buying opportunity for investors. According to BTG Pactual, a leading Brazilian investment bank, Brazilian stocks have traded below historic 12-month forward price-to-earnings multiples (as of January 2024).

Many emerging markets funds have already taken overweight positions on Brazil, and as more domestic investors pivot back to equities as interest rates come down, more capital will flow into the markets and be available for new listings.

An opportunity for Argentina?

Argentina may be Latin America's second-largest economy, but a long-running, economic malaise has kept the country off the IPO radar for many years. Inflation in Argentina has been running at 250 percent, and the country is the IMF's largest debtor. As a result, investors have opted to keep their distance.

That could be changing. The election of Javier Milei, an economic libertarian who ran on a pro-free market, deregulation platform, as president in last year's election saw a surge in Argentine stock prices, which are up more than 300 percent over the past 12 months.

Milei's plans to drastically cut government spending, lift pricing and foreign exchange controls, and rebuild foreign exchange reserves have begun to shift investor sentiment.

However, Milei's policy agenda is radical and has been met with substantial resistance in Argentina's Congress. The initial wave of investor euphoria has also calmed as the practicalities of implementing Milei's reform program have come into view. Whether the new administration’s reforms lead to promising IPO conditions remains very unclear. Investors will be watching closely.

White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

© 2024 White & Case LLP

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