Bankers’ bumper 12 months for IPOs isn’t fairly going to plan | USAEMALL.com

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There are times when underwriters of initial public offerings are in their element. Then there are points when markets swing wildly and regional conflict ignites. This year started as the former and is turning into the latter. Companies that would like to go public are on the horns of a dilemma.

Bankers generally felt that this year’s IPO market would build steadily from 2025. Last year, volumes globally jumped by one-third to $155bn, creating the best haul since 2021’s record $434bn. Indeed, this January saw US IPOs get off to their fastest start since the 2021 bonanza; Blackstone boss Jon Gray said the IPO environment had hit “escape velocity”, adding that the private equity giant had plenty of companies it wanted to take public. 

There are signs, however, that the flow is slowing. The Vix index that measures market volatility is currently around 23, where a reading below 18 is broadly seen as IPO-friendly. Few companies hoping for a credible first-day performance want to brave choppy waters. Online travel agent Loveholidays is considering holding off its London IPO until after Easter, while Japanese digital payments provider PayPay paused before launching its $1bn deal in New York. It has big cornerstone investors and SoftBank’s name to support it, removing some of the risk. 

The stresses are twofold. First, there are wobbly markets. The S&P 500’s 1 per cent fall this year is unremarkable in itself. Yet individual sectors and themes are swinging rapidly in and out of investor favour, making it harder to time — and price — any particular float. Consumer discretionary stocks, for example, have veered between 6 per cent gains year-to-date and 5 per cent losses, according to Charles Schwab analysts, while utilities have been up 7 per cent or down 2 per cent, depending on the week.

Then there is the sheer size of some potential IPO candidates, including Elon Musk’s rocket maker SpaceX, Anthropic and OpenAI. Should conditions ease, they are liable to suck the oxygen out of the market. A 3 per cent float of SpaceX at a $1.5tn valuation — not the highest figure being bandied about — would, at $45bn, be almost twice the US record of $25bn raised by Alibaba in 2014, and almost as much as all 186 US IPOs raked in last year. 

Some issuers have considerations beyond the state of the market. Musk wants to launch SpaceX’s share sale in mid June, close to his birthday and a specific planetary alignment. That makes floating from mid-May potentially tricky for others, assuming investors want to save funds for the big one. Depending on how SpaceX performs, it may also create challenges for those who go after. Large bodies, in finance as well as physics, have a habit of warping time and space.

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