(Read David (not Daniel) in §2)
by Pablo Mayo Cerqueiro
LONDON (Reuters) – Investment bankers are hoping for a resumption of initial public offerings (IPOs) in 2024, after the U.S. Federal Reserve (Fed) signaled it could begin easing monetary policy next year.
“The IPO markets will be better off in 2024 than this year, and I expect volumes and ease of access to capital markets will improve throughout the year,” said David Ludwig, global head Equity Capital Markets (ECM) at Goldman Sachs.
This forecast comes after a difficult year for new listings. Only $532 billion was raised in equity capital markets this year, according to Dealogic, the worst annual performance in the last decade after 2022.
Activity levels for IPOs have hit their lowest level since 2016.
Some of the companies that listed this year, including chipmaker Arm Holdings and sandal maker Birkenstock, saw their prices fall on the secondary market.
However, a significant portion of these stocks are now trading above their issue price, while the Fed’s latest decision has triggered a rally in risky assets.
“We find ourselves, at worst, in the middle of a pause in rate hikes, at best, at the start of their easing movement,” said Stéphane Boujnah, chief executive of European stock exchange group Euronext. This will encourage investors to shift their assets from bonds to stocks, he added.
Next year could see the listing of Singapore-based fashion group Shein, which is targeting a valuation of up to $90 billion on the New York Stock Exchange.
Private equity group Permira is preparing to list Golden Goose, which produces luxury sneakers, in a deal that could raise around a billion euros, according to some sources.
Experts expect private equity funds to drive the sector in the coming months, as managers must return capital to their investors. The number of funds having unwound their holdings was particularly low in 2023.
“The preconditions for reopening IPO markets are in place, and private equity funds hold assets that are attractive to the public markets,” observes Gareth McCartney, global co-head of ECM at UBS.
Some asset managers are even considering going public, like the companies they own, in order to finance their expansion and allow their holders to sell their stakes.
British firm CVC may revive its IPO plans after postponing them at the start of the quarter, while General Atlantic is reportedly considering a US IPO.
“The splits could also support activity next year,” adds Andreas Bernstorff, head of ECM at BNP Paribas for Europe, the Middle East and Africa (EMEA).
European groups such as Bayer, Renault, Sanofi and Vivendi have announced that they are exploring the possibilities of splitting up and spinning off some of their divisions.
Bankers have warned that it will take several successful IPOs before more companies can access the markets. The US presidential election could also limit access to capital markets in the second half of 2024.
While waiting for a reestablishment of IPOs, bankers intend to continue to receive commissions on capital increases and sales of participations.
“Secondary sales have been a significant trend in 2023 and will continue to be so next year, perhaps to a lesser extent than in 2023,” said James Palmer, head of ECM EMEA at Bank of America.
In recent months, shareholders have sold multibillion-dollar stakes in companies like Heineken and the London Stock Exchange.
Governments have also started to offload their stakes in banks saved during recent crises, such as Monte dei Paschi and ABN Amro.
Company boards of directors could also favor shares and convertibles to refinance maturing maturities, in order to limit the impact of rising rates.
“I think 2024 could be very different from this year,” says Aloke Gupte, co-head of international ECM at JPMorgan.
“Even though volatility is likely to persist, is there any reason to think that 2024 could be a better year than 2023? Absolutely.”
(Report by Pablo Mayo Cerqueiro in London, French version by Corentin Chappron, edited by Blandine Hénault)
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