"Let's Wait Until Next Year" US IPO Market Hesitates Amid Rising Volatility

The U.S. initial public offering (IPO) market, which had been raising hopes for a rebound this year, is faltering again. With the recent sharp increase in stock market volatility compounded by the upcoming November presidential election and uncertainties surrounding the Federal Reserve's (Fed) monetary policy, companies are increasingly postponing or canceling their IPO plans until next year.

[Image source=AP Yonhap News]

According to the Wall Street Journal (WSJ) on the 26th (local time), Chinese autonomous driving technology company WeRide postponed its plan to list on the New York Stock Exchange last week, citing that preparing the related documents is taking longer than expected. StubHub, a ticket resale platform, also postponed its investor roadshow originally scheduled for last month to September and is now considering further delaying it until next year.

The WSJ reported that "the IPO market is cooling down," noting that "September is usually a popular time for companies to go public, but increased market volatility this month has caused some plans to fall through." Typically, the weeks following Labor Day (the first Monday in September) are considered a preferred IPO window for companies. This period comes after the traditional summer lull and before companies release their quarterly financial statements, making it a time when market stability is usually confirmed. Accordingly, companies aiming for IPOs in late September to early October begin preparing documents and roadshows in earnest starting in August. However, this year, the sharp rise in market volatility in early August has disrupted the plans of companies pursuing IPOs within the year.

As a result, companies planning IPOs this year now face a critical decision: whether to proceed quickly with their IPOs or wait until next year. A representative company expected to go public this year is Cerebras Systems, an artificial intelligence (AI) chip manufacturer.

Currently, there is growing consensus on Wall Street to postpone IPOs until next year. Many bankers, lawyers, and corporate executives are concerned about the possibility of another volatile market similar to the Black Monday earlier this month, considering the uncertainties surrounding the November presidential election and the extent of the Fed's interest rate cuts, WSJ noted. Clay Hale, co-head of the equity market at Wells Fargo, said that although there was initial optimism that IPO activity would pick up by the end of 2024, recent market volatility has effectively dashed those hopes. He assessed that "it is really difficult to plan transactions in the fourth quarter."

According to Dealogic, companies that have gone public on the U.S. stock market so far this year have raised about $25 billion, which is far below the 10-year annual average of $55 billion. The WSJ pointed out that while companies like Reddit and Lineage, which went public this year, succeeded in raising large amounts of capital and boosted expectations for a market recovery, the majority of companies that have gone public in the past two and a half years are trading below their offering prices.

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