IPO activity in the United States has seen dramatic fluctuations in recent years. The peak in 2021 set a record, with approximately 135 billion U.S. dollars raised due to a surge in tech companies and Special Purpose Acquisition Companies (SPACs) going public. However, this rapid growth was followed by a stark downturn in 2022 and 2023, which led countries like China and India to emerge as the
, despite the U.S. being home to the
. The New York Stock Exchange (NYSE) and the Nasdaq Stock Market are also the
What drives companies to file for an IPO?
IPOs can have many advantages and bring a great deal of benefits to companies. A stock market launch serves as a mechanism for companies to raise capital by offering shares to the public for the first time. This transition allows private businesses to access significant funds to support growth and innovation, while investors gain the opportunity to own a stake in potentially promising companies. For these reasons, IPOs are considered a milestone for a company, signaling maturity and readiness to meet the rigorous requirements of public market scrutiny. However, not all IPOs are successful, at least not in the short term. In 2023, one in two U.S. IPOs recorded
negative first-day earnings per share. On the other hand,
some companies profit greatly after their IPOs, like Jin Medical International, which saw its shares value increase almost 3,000 percent during the first year as a public company.
A brighter future for IPO activity?
Despite the benefits listed above,
IPO activity has been notably low in the last few years. Factors such as rising interest rates and tightening financial conditions, economic concerns, market volatility, and geopolitical tensions discouraged IPO activity, both in the U.S. and worldwide. Many companies chose to postpone their IPOs and favored private funding rounds over public listings instead. Despite these challenges, the outlook for IPOs is cautiously optimistic. Market experts anticipate that as inflation moderates and interest rates stabilize, investor confidence could improve. If economic conditions show signs of recovery and stock markets gain stability,
IPO activity may pick up as early as late 2024 or into 2025. Additionally, pent-up demand from companies that postponed their IPOs during the recent downturn could lead to a surge in activity when conditions become favorable.
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