Picture this: a glimmer of hope shining through the dark clouds of the financial market. It seems that the IPO market is showing signs of life, and analysts are crossing their fingers and toes in the hopes that more companies will be enticed to go public in the year 2024. It's like a butterfly emerging from its cocoon or a superhero rising from the ashes. Okay, maybe I'm getting a bit carried away, but hey, who doesn't love a good comeback story?
According to Renaissance Capital, a total of 108 initial public offerings in the year 2023 managed to raise a whopping $19.4 billion. That's quite a leap compared to the lackluster performance of 71 IPOs that raised only $7.7 billion in the previous year of 2022. Back then, high inflation and rising interest rates put a damper on companies' enthusiasm to hit the market. But fear not, my financial aficionados, for 2023 had some shining stars on the IPO stage.
Healthcare products company Kenvue made its grand entrance in May, followed by U.K. chip designer Arm Holdings in September and footwear company Birkenstock in October. These titans of industry accounted for more than half of the total IPO proceeds, giving the IPO market the much-needed boost it craved. Oh, and let's not forget about Instacart. They had their moment in the spotlight with a splashy IPO during the late summer. It was like the IPO market was throwing a party, and everyone wanted to be invited.
But before we get too carried away celebrating, let's take a moment to reflect on the hurdles these IPOs had to overcome. The year 2022 was not kind to them. The highest inflation in four decades gripped the economy, and concerns about its impact caused companies to hesitate. The Federal Reserve, like a valiant knight in shining armor, stepped in to tame inflation with historic rate hikes. Borrowing became more expensive, and caution echoed through the halls of the IPO market.
Thankfully, the tide seems to be turning. The Fed's preferred measure of inflation, the monthly personal consumption and expenditures report, has cooled down to a manageable pace of 2.6%. Other measures, like the consumer price index, reached dizzying heights of 9.1% in 2022. But fret not, for the Fed has been diligently holding its benchmark rate steady, signaling the possibility of rate cuts in 2024. And Wall Street, always the optimist, is eagerly placing its bets on an early rate cut in the new year.
So what does all this mean for the IPO market? Well, with cooling inflation and falling interest rates, we may see the market return to a more normal level of activity. If we rewind the clocks to the years 2017 to 2019, the IPO market saw an average of about 170 IPOs with average proceeds of $43 billion. It's like the IPO market is destined for a renaissance, a revival if you will.
In fact, Renaissance Capital, the harbinger of IPO predictions, believes that the signs are pointing towards a solid pickup in 2024. Can you feel that electric anticipation in the air? The IPO market is on the cusp of something great!
But hold your horses, there's more. The IPO market thrives when the economy thrives. And guess what? Corporate profits are expected to rise after shaking off an earnings recession. Analysts forecast a gain of just under 2% in the fourth quarter of 2023 for companies in the S&P 500. But wait, it gets better! The first quarter of 2024 could see a gain of over 8%, followed by a whopping 10% gain in the second quarter. Cue the applause and the dancing in the streets!
To top it all off, the S&P 500 index is projected to close the year with a gain of over 20%. It's like the stock market is throwing a non-stop party, and everyone's invited! Who said finance couldn't be fun?
So, my dear readers, keep your eyes peeled and your hearts open. The IPO market is awakening from its slumber, ready to dazzle us with its potential. As CEOs gain more confidence in the promised 'soft landing' of the economy, IPO activity may speed up even further. And with Goldman Sachs analysis predicting this beautiful outcome, who are we to doubt it?
2024 holds the promise of a reinvigorated IPO market, and we can't help but feel that this is just the beginning of something extraordinary. So, buckle up, folks, because the IPO rollercoaster is about to take off, and it's bound to be a wild ride full of ups and downs, twists and turns, and hopefully, a grand finale that will leave us breathless.
Get ready, world. The IPO market is back, and it's ready to conquer the stage. Here's to an exciting and prosperous 2024!
