Is There 'FOMO' in the US IPO Market Too? ... Is a Revival on the Horizon?

Analysis suggests that the so-called 'FOMO' (Fear of Missing Out) mentality, where investors fear missing out on profit opportunities, is emerging even in the frozen initial public offering (IPO) market. Following the Kava Group last month, the recent surge of Audity Tech on its first day of listing is seen as a sign of the IPO market's full-fledged revival.

[Image source=Reuters Yonhap News]

The Wall Street Journal (WSJ) reported on the 24th (local time) that "as the IPO market awakens from a long slumber, FOMO is driving investors," describing the atmosphere around Audity's IPO last week. WSJ stated, "Audity's successful debut signals that revival ingredients are in place," adding, "IPO investors are shifting from a 'fear of losing money' to a 'fear of missing out' (FOMO)."

The Nasdaq index, which is typically considered a benchmark for IPOs and is tech-stock focused, has surged more than 34% just this year. Market volatility has also significantly decreased. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear gauge,' has remained well below its long-term average of 20 since the end of March. Additionally, with recent confirmation of easing inflation trends, expectations are spreading that the Federal Reserve's rate hikes may end this month.

WSJ particularly noted that investors have returned to speculative betting. The outlet reported, "Several major barriers have been lifted in recent weeks. U.S. stocks have hit 52-week highs, volatility has decreased, and inflation has eased," adding, "Most importantly, investors have started speculative bets again." Investors attending Audity's roadshow reportedly expressed surprise at the atmosphere, which resembled an IPO boom period.

Ultimately, WSJ's assessment is that whether the IPO market regains momentum depends on private companies. Daniel Button-Morgan of Bank of America (BoA) said, "It is supply, not demand, that is constraining the IPO market," adding, "At this point, investor demand is not an issue." One leading indicator of the IPO market, the capital increases by listed companies, has also risen sharply. According to Dealogic, the amount of capital increases by listed companies in Q2 ($31.9 billion) rose 150% year-over-year, marking the highest level since Q3 2021. This indicates that investor demand has revived.

From September onward, a series of major IPOs are lined up. Among them, the British semiconductor company ARM is particularly attracting market attention. Wall Street expects ARM to go public around mid-September, targeting a corporate valuation exceeding $50 billion. Marketing automation platform Klaviyo is also likely to list in September. Companies such as Birkenstock, Turo, and Instacart are also potential IPO candidates this fall. WSJ predicted, "More (listing) pipelines will follow."

However, some companies still remain reluctant to pursue IPOs. Fintech company Stripe initially planned to go public this year but canceled. Reddit has stated it has no plans for the time being. Digital advertising company Aleph Group withdrew its IPO application with the U.S. Securities and Exchange Commission citing economic uncertainty. According to Dealogic, the size of U.S. IPOs excluding special purpose acquisition companies (SPACs) in the first half of this year was only $9.1 billion, far below the 10-year first-half average of $27 billion.

This content was produced with the assistance of AI translation services.