There is renewed optimism in the initial public offering (IPO) market. Normally IPO activity gains momentum in the second quarter, and peaks in June. And this year was also no exception to this trend.

In the second quarter of 2023, 23 IPOs raised a total of $6.6 billion. While deal count held steady from the prior-year period, quarterly proceeds were the highest in six quarters, even without J&J spin-off Kenvue’s $3.8 billion IPO, per Renaissance Capital.

Overall, there have been 67 IPOs priced this year, up 28.8% year over year. Total proceeds raised were $9.9 billion this year, up 122.6% year over year. There have been 109 IPOs filed this year, up 19.8% year over year, per Renaissance Capital.

Renaissance IPO ETF IPO is up 28.6% this year while Renaissance International IPO ETF IPOS has lost about 15%. The S&P 500 is up 14.7% this year (as of Aug 16, 2023).

Signs of Strength in the Current Market; Real Uptick in 2024?

So far this year, 19 IPOs have raised $100 million or more, beating all of 2022 (16 IPOs), but still well below the 10-year median of about 70 sizable IPOs at this point in a year. Certain IPOs such as restaurant chain Cava CAVA, beauty and wellness company Oddity ODD and Vietnamese EV maker VinFast VFS surged on the debut this year.

However, John Chirico, Citi’s U.S. head of banking, capital markets, and advisory, anticipates a substantial uptick in the IPO market in 2024, with promising opportunities toward the end of the year, as quoted on Yahoo Finance.

Mid-Sized IPOs Will Likely Rule in 2024

Stability of the companies offer the strength in the IPO space. Notable cases like SoftBank-backed chipmaker Arm’s IPO and the M&A activity surrounding US Steel (X) accentuate the importance of company-specific factors over general market trends, per the Citi’s professional.

Chirico also emphasizes the significance and ruling power of mid-sized IPOs next year, which can result in companies valued at $2 billion to $3 billion. However, he predicts that a steady state level in the IPO market can be achieved in the first half of the following year.

Not a Repetition of 2021 Boom Likely

The year 2021 witnessed an unprecedented IPO boom with 2,388 IPOs raising $453.3 billion, according to EY data, quoted on Yahoo. While this surge is seen unsustainable, stable markets in years like 2018 and 2019 are expected to be repeated in 2024.

Factors Shaping the Near Future of IPOs

While IPO activity is not absent in the current year, Chirico highlights the expectation for a prosperous IPO market in 2024 is rooted in the anticipation of a more favorable backdrop. We believe that the ongoing banking crisis may cause the recovery later-than-expected. We also believe that the renewed rate hike worries could be a drag to the IPO market.

ETFs to Win in This Scenario

The U.S. IPO ETF IPO can be played given the sluggish recovery in the space. A few different sector ETFs can also be played in this regard. Participation in the IPO market by U.S. and foreign industrials companies have been noticed this year. There have been 83 U.S. Industrials IPOs, the most in any sector. This means great activities in the industrials sector. This makes it important to play iShares Global Industrials ETF EXI and iShares U.S. Industrials ETF IYJ.

As far as the tech stocks are concerned, iShares Global Tech ETF IXN should be kept under watch due to higher number of global IPOs from the technology sector. Restaurant ETF like AdvisorShares Restaurant ETF EATZ can also be tapped due to CAVA’s IPO success in the United States.
Renaissance IPO ETF (IPO): ETF Research Reports

iShares U.S. Industrials ETF (IYJ): ETF Research Reports

Renaissance International IPO ETF (IPOS): ETF Research Reports

iShares Global Tech ETF (IXN): ETF Research Reports

iShares Global Industrials ETF (EXI): ETF Research Reports

AdvisorShares Restaurant ETF (EATZ): ETF Research Reports

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