TEST: The slow revival of the US IPO market is set for its biggest test yet in September, with larger and more tech-focused stocks testing the waters. Activity this year has been under 10% of that seen in the listing boom of 2021 but has been slowly dusting itself off,. After the trend for company spin-offs, the recent CAVA restaurant blockbuster, and a backdrop of stronger market performance and investor appetites. It is a positive sign of broadening company optimism. But the reality is that the number of US listed stocks is down over 40% over the past twenty years. This is a mixed blessing. It limits investor choice. But M&A activity and c. $1 trillion annual share buybacks dwarf IPO’s, restrict stock supply, and help support the world’s highest valuations.
PIPELINE: UK semiconductor tech licenser Arm, owned by Japan’s Softbank, has filed for what is set to be the biggest IPO of the year as it seeks to return to the public markets. Whilst LVMH-backed German shoe brand Birkenstock, and US grocery delivery platform Instacart are reportedly looking to follow. The first two choosing to list in New York rather than their domestic markets given the higher valuations, bigger investor base, and encouraged by the 28% surge this year in the Renaissance index of recently listed stocks, that handily bested the S&P 500.
CONTEXT: US stocks are getting much bigger but also fewer. The US dominates global equity markets, with a c. 66% free-float market capitalisation weighting. This is super-sized versus its 25% of global GDP, and the opposite of markets like China. But the number of domestic stocks listed in US markets peaked way back in 1996 (see chart) and has since fallen by 40%. As IPO activity has paled against the number of company mergers & acquisitions and private equity ‘take-private’ deals. The 2021 IPO boom barely moved the listing needle in an historic context.
All data, figures & charts are valid as of 23/08/2023.