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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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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

5 min read

Despite high interest rates and geopolitical uncertainty in the Middle East and Ukraine, US IPO markets rallied slightly last year after a grim 2022.

US IPO proceeds (including SPACs) reached US$23.94 billion last year, up marginally from US$8.6 billion in 2022. However, the number of IPOs slipped from 180 in 2022 to 154 last year.

The improvement in the year-on-year IPO proceeds figures, however, does not change the fact that the past two years had been challenging for US IPO markets. Although IPO proceeds in 2023 may have improved on 2022 levels, they were still well shy of the US$316.63 billion in proceeds recorded at the peak of the market in 2021 and less than half of the US$62.56 billion in proceeds posted pre-pandemic in 2019.

Better times ahead?

After two years of slow IPO activity, US investors and companies are cautiously optimistic that IPO activity could gather momentum in 2024.

It is still early, but IPO activity has had a strong start in 2024, with global stock markets recording the best first-quarter performance in five years in Q1 2024. The MSCI index of global stocks showed gains of more than 7 percent during the first three months of the year, while the S&P 500 hit record highs as a soft landing for the US economy and a boom in the artificial intelligence industry lifted markets.

Moreover, in 2023 and into 2024, the US's position as a global magnet for cross-border listings has remained undiminished, with high-profile global businesses based in other jurisdictions turning to the deep and liquid US stock markets to raise capital over domestic options.

For example, German shoemaker Birkenstock secured a market valuation of US$8.6 billion when it listed on the New York Stock Exchange in October 2023, while UK-based chipmaker Arm Holdings was valued near US$60 billion following its IPO a month earlier on Nasdaq.

Momentum behind cross-border listings in the US has carried into 2024, with Kazakhstan-based fintech business Kaspi.kz (see also section 5 on Bright spots: Sweden and CIS present opportunities after a challenging 2023) valued at US$17.5 billion following its Nasdaq IPO in January.

Steady performance encourages new issuers

It is hoped that the steady performance observed post-IPO and across US stock markets generally will encourage more companies to pursue IPOs in the coming months.

According to the Financial Times, citing Dealogic data, companies that raised US$100 million or more when listing in 2023 beat the S&P 500 by an average of 18 percentage points. Moreover, the Renaissance IPO Index, which tracks the performance of companies that have listed within the past three years, climbed 44 percent in 2023, also beating the S&P 500.

However, not all IPOs have traded up after listing, and there have been periods of volatility in some stocks post-IPO. Nonetheless, on average, IPO issuers have delivered for investors, improving confidence in the investor community.

Meanwhile, the S&P 500 and Nasdaq Composite Index closed at record highs at the beginning of March 2024. This will also encourage potential US IPO candidates looking to list when the backdrop for achieving an attractive valuation has improved compared to a year ago.

Technology is key

Computers and electronics were the most active sector for IPOs in 2023, with US$8.24 billion in proceeds, and the market is expected to remain receptive to technology companies in 2024—especially those with AI applications.

Investors have shown strong support for chipmakers producing hardware and technology used to power AI tools since the start of the year. For example, the AI boom drove up shares in chipmaker Nvidia, which has climbed to a value of more than US$2 trillion for the first time early this year. AI appetite has also supported the strong gains in Arm Holdings (up more than 80 percent after the first two months of 2024) following its IPO last year.

On the back of this positive momentum, Astera Labs, a provider of chips-to-cloud computing and AI infrastructure companies, successfully pursued a listing where its shares reached 72 percent following its market debut, valuing the company at approximately US$9.5 billion.

Other tech stocks have also traded well this year (as of March 2, the Dow Jones US Technology Index has climbed 61.33 percent during the past 12 months), laying the foundation for big-ticket technology IPOs throughout the year.

Biotech has been another resilient market for US IPOs. Biotech companies view stock markets as a reliable route to funding research and clinical testing programs, while investors have sought exposure to the space because of the potential for high returns from successful biotech business.

During the first six weeks of 2024, biotech IPO activity was strong, with a string of biotech IPOs worth more than US$100 million proceeding to put the sector on track for its best year of IPO activity since 2021, according to BioPharma Dive. For example, in January, the IPO of cancer drug developer CG Oncology has been one of the biotech highlights, with the company's share prices rising by more than 50 percent on listing to value the business at US$1.75 billion.

Positive but pragmatic outlook

Even though the outlook for 2024 is improving, ongoing geopolitical tensions and elections throughout the world, including a looming US presidential election at the end of 2024, pose persistent challenges.

Meanwhile, the strong stock market gains observed this year have been driven by the largest listed companies, and while IPO conditions for growth companies are improving, the market is still relatively choppy for smaller issuers.

Market stakeholders, however, will be hoping that a strong start to the year, peak interest rates and pent-up demand will outweigh these challenges and encourage more issuers to proceed with IPOs in 2024.

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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.

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