SUPERNEWS

Macro

Election Impact: US IPOs Raise $13.7B, But Face Nov Pause

US IPO activity sees $13.7 billion raised in 2023, with election uncertainties expected to briefly pause listings.

By Athena Xu

ᐧ

4/29, 13:39 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
article-main-img

Key Takeaway

  • US presidential election in November expected to temporarily pause the IPO market recovery, influencing timing adjustments for companies.
  • Despite a slow start, 2024 IPO activity has raised over $13.7 billion, signaling a cautious optimism among investors and companies.
  • Market participants anticipate a more robust IPO environment in 2025, post-election clarity and improved interest rate visibility.

Election Impact on IPO Market

The upcoming US presidential election in November is poised to influence the timing of initial public offerings (IPOs), with advisers and investors predicting a temporary pause in the IPO market around the election date. Despite this, the overall pace of listings, which has seen an improvement from last year, is not expected to be significantly affected. Companies have raised over $13.7 billion on US exchanges this year, surpassing the total raised in the same period in 2023. However, the volume of IPOs through April remains 92% below the record year of 2021, indicating a cautious market environment influenced by election uncertainties.

Pre-Election IPO Adjustments

Mark Schwartz from Ernst & Young highlighted the potential for a "widening of the vacuum" around the election, affecting the timing of certain deals. The historical data analyzed by ICR Capital LLC shows a 50% drop-off in the number of IPOs pricing in November of presidential election years, compared to other months. This trend suggests companies may either accelerate their IPO plans to avoid the election period or postpone them until the end of 2024 or into 2025. Previn Waas of Deloitte & Touche LLP emphasized the importance of avoiding the noise surrounding the election, indicating a strategic avoidance of the two weeks before and after the vote.

Market Re-Emergence and Uncertainties

Despite the election-related pause, there is optimism for a resurgence in IPO activity, particularly after the Labor Day holiday and before the final weeks of October. This optimism is tempered by uncertainties such as ongoing geopolitical tensions and the Federal Reserve's stance on interest rates. Mark Schwartz mentioned a "re-emergence" in the IPO market, driven by early-year optimism and more stable geopolitics. However, companies delaying their IPOs risk missing out on the 2024 calendar due to the narrow window for launching a roadshow after the election.

Street Views

  • Mark Schwartz, Ernst & Young (Neutral on the IPO market):

    "Whether there’s a bigger pull forward or a push back really depends on how the narrative continues to develop."

  • Previn Waas, Deloitte & Touche LLP (Neutral on the IPO market):

    "The election is more of, avoid the two weeks before and after, than who will win. There will be a lot of noise around that, and an IPO could get lost in the noise."

Management Quotes

  • Francois Chadwick, Partner at KPMG:

    "By the time we get into 2025, the global election uncertainty will be off the table, and interest rate clarity will be better. The only thing that’s slowing IPOs down is whether they’re capable of being public, and a lot of companies are working on the fundamentals being there."