Will 2024 Represent a Rebound for the IPO Market? Private market investors think so.

The IPO market may be poised for a resurgence in 2024, following a dismal year in 2022 for listings and a sluggish 2023, despite an encouraging string of 2H23 listings from companies such as Arm, Klaviyo and Instacart.

One possible catalyst for a resurgence in the IPO market is the macro landscape. The NASDAQ ended the year up 43%, yields on the 10-year treasury dropped nearly 100 bps during 4Q23 and the VIX is as low as investors have seen in half a decade. IPO buyers are closely watching the next few inflation prints and Fed decisions. With the Fed signaling a continued pause on rate hikes, and even a cut or two this year, the public equity markets may have more room to run, presenting an opportunity for a boom in the IPO market.

One of the most powerful tailwinds to the IPO market is the large cohort of large private unicorns, which could provide ample candidates to establish and sustain a robust IPO market.

The uptick in public market sentiment has been reflected in increased buyside interest for private securities, a key indicator for IPO confidence. At Rainmaker Securities, we saw a 65% increase in bid volume from 1H23 to 2H23 alone. This surge, coupled with the backlog of companies poised for public offerings, sets the stage for a potentially vibrant IPO landscape.

There are several possible IPOs on the horizon. We’ve already seen Shein confidentially file, and believe companies like Turo and Reddit, who have placed yearslong IPO plans on hold, could be among the first companies which need to go public.

If performance holds up, and underwriters can reach a sustainable flow of consistent returns to IPO investors, the back half of the year could get even more exciting. This is when we could see a company like Stripe or Databricks, two of the most valuable companies on the private markets, make their debut — perhaps even through a direct listing.

The $86 billion elephant in the room is OpenAI and the entirety of its generative AI cohort, which are seeing unprecedented private market demand and could ride the strong wave of investor interest right onto a public exchange. Whether it’s OpenAI, Anthropic, Cohere or others, we’ve seen trading across the sector triple or quadruple last round valuations, which could inspire investors’ hope for similar returns upon a public listing.

It’s worth acknowledging that investors need to exercise prudence and maintain a balanced approach. While the pause in interest rate hikes and the rally in public markets is reassuring, the broader economic landscape remains dynamic and susceptible to unforeseen shifts. Factors such as geopolitical tensions, global supply chain disruptions, or unexpected regulatory changes could swiftly influence market sentiment. However, with careful consideration and strategy, private investors can position themselves to capitalize on the potential opportunities that the 2024 IPO market may bring.