You're listening to Bloomberg Business Week with Carol Messer and Tim Stenebek on Bloomberg Radio.
No, it's often missing from Charlie's updates.
What talk of IPOs, Well, that's missing from pretty much everything lately.
It has not been a happening scene. Although there was a couple of stories today, arm which is of course backed by SoftBank, in talks with Nvidia to join maybe a group of investors potential investors to anchor it's IPO, that's according to FT. And then you had JBS, the world's largest meat supplier, filing with the SEC that it is actually finally, finally, finally moving ahead with its long delayed plan to list on the NYSESE. So maybe things are starting to move a little bit.
Maybe. But I like to type IPO, go on my Bloomberg terminal and what do you say? And then click on time series and deal count, and I see that in the let's say, fourth quarter of twenty twenty two, we had four hundred and fifty nine IPOs, and in the first quarter of twenty three we had three hundred and fifteen IPOs, And that has been kind of the trend.
Yeah, it's it's like pretty shocking how much it's down. Hey, so let's see what Rachel Gering is seeing. She's Ey America's IPO leader. She's with us on zoom from Nashville, Tennessee. So Rachel, good to have you back again. Has your team just said, listen, go take like a six month vacation and come back in twenty twenty fourth and she'll be a better what's it like? Tell us about the environment.
Well, it's definitely a bit chilly out there, but we're not packing up and taking long vacations by any means. There's continues to be strong interest of companies interested in IPOs and planning to ipo when the market's right for them. But there's definitely very much a wait and see atmosphere continuing. But we're hearing good news even today that hopefully will just help build and continue building some momentum that we need to see that open up the IPO market.
What is the problem right now? Why don't investors want to see IPOs? This market has been fantastic if you look at the gains that we've had. It's not only the Nasdaq, the S and P in the Dow Jones are up this year as well, why don't people want to buy new companies?
Well, I think there's a multitude of factors, and some of it is also driven by valuation. Investors are willing to invest in the asset class, but not at any price. So there's still that tension between what a company is needing and wanting from evaluation versus what investors are willing
to pay. So that's still working its way out. We're still we're seeing some good deals occurring, even you know, recently in Q two, so you know, through through the first half of twenty twenty three in the US, we're at about sixty three IPOs. Q one to Q two was relatively flat and volume, but proceeds more than doubled in just Q two, largely one IPO raising four point four billion in May. But we're starting to see some
strong deals, some strong valuations. These companies need to perform price well and then perform in the aftermarket and that will hopefully drive continued interest from investors.
Rachel. It's interesting. We had on an individual who's been in the real estate for a long time, and she basically just is saying that sellers maybe have to come down a little bit in the real estate market that they think, Okay, I'm really worth this, and buyers are saying nope, not even And so there needs to be a bit of a reckoning in terms of those individuals
or those companies looking to go public. Do they need to have a little bit of a reckoning about valuations and maybe lower their expectations and that's ultimately what will open up the IPO market.
There is definitely that occurring in that reckoning, as you mentioned.
But does it need to happen even more? That's what I guess I'm asking.
Yes, it'll need to happen an even more. But then also the macroeconomic backdrop, we need to continue seeing the improvements that we're starting to see, but we need to see those sustained to also get companies interested in entering the market. So the inflation news from today is definitely positive. Volatility is back to pre COVID lows, you know, interest rate hikes are starting to slow, hopefully they're coming to
an end. So those factors also are influencing companies coming to market, and they're just willingness to given just the unpredictability that has been occurring over the last several quarters.
I mean, Rachel I look at the IPO pipeline in my mind and I see it, you know, getting ready to burst. We have private equity women and men in this studio and over the past few months they've been genuinely frustrated because they don't see any movement. They want to have exits and if they don't have those, their business model is in deep trouble. So there must be a lot of companies that are ready when the time is right to go public.
Absolutely, which is why you know, myself and my team we haven't taken a vacation, as we were joking earlier. There are definitely companies. The pipeline is strong, and there's still high interest. It's just more around the timing that's right for the organization and valuation.
Well, and it's interesting, but is it tougher. I mean, we've talked about the benefit of startups is you know, there is a lot of money slashing around in the private world and private markets that they have the luxury of staying private for a lot longer. Do you continue to see that trend as well? That that's and some would say that's a benefit. It gives them time to
really develop, really become a profitable company. So that when they do maybe ultimately do their exit in the public markets, they're a viable company.
Yeah, we're still seeing some slowness even in the private financing side. There's a lot of dry powder out there. But investors are discerning and they are being They are
looking for the right companies to invest in. For the For the larger, more pre ip companies, a lot of them took advantage of the market in twenty one and so they probably do have enough capital to sustain, so they're not looking to needing to raise proceeds immediately, largely because they took advantage of the market, you know, well over a year ago.
Are there any other exits that have kind of taken up the slack? Are there any other liquidity events as some people call them, that are taking up the slack of the lack of IPOs.
Well, you know, the other thing we're seeing even in the IPO market and so forth, is just from the corporates. Corporates are actively exploring ways to unlock value as well, and so we started to We've seen a couple now spin transactions coming out of the corporates, and we expect to see more of those in the pipeline as well.
What about when you talk about that there's a lot of interest in companies. I guess talking with you and your team about wanting to go public, what types of companies in terms of sizes, valuation, And I'm really curious about industries, like are you seeing all of a sudden a surge in AI type companies that want to go public? They're just kind of waiting. So can you walk us through some of that specificity.
The interesting point is even what we're seeing with the completed IPOs occurring now and then the companies that we're working with in the pipeline across all sectors. You know, the volumes are still being driven off of technology in life sciences, but the larger deals are occurring, you know, across retail, consumer, energy, financial, so forth. So we're seeing a good variety across sector. And what investors are are definitely focused on are profitability. So it's not growth at
all costs, but it's growth and profitability. So those more mature companies that have a longer track record are those that we're seeing, you know, probably will come to continue coming to market in these earlier stages.
Rachel, what do you expect for next year? Do you think it's going to be a better year or are you worried that a recession is going to make it worse.
We're optimistic. We think that activity will if we continue to see the improved macro economic backdrop that we talked about. If that continues to improve and even you know, get better, then I think the back half of this year and then definitely twenty twenty four is going to be a really promising year for IPOs.
All right, interesting stuff. We will certainly be on it, Rachel. Thank you so much. Rachel Goering, she's IPO leader of u I Americas. On zoom from Nashville, Tennessee.