Goldman Sachs: IPO Market Could Surpass 2022-2023 Levels

This year could mark a recovery for the initial public offering (IPO) market.

That’s according to a report by Goldman Sachs, cited Sunday (Feb. 11) by Seeking Alpha. 

“We expect the US economy will continue to grow, the nominal 2-year UST yield will decline modestly, and valuations will remain elevated relative to history,” Goldman Sachs strategists wrote. “If soft data improve to match the hard economic data and equity investor pricing of economic growth, it could lead to a further increase in our IPO Issuance Barometer in coming months.”

That barometer has risen to 119, its highest level in two years, the researchers said.

So far, the researchers said, there have been 10 IPOs completed on the U.S. markets with more than $25 million in proceeds, raising $1.9 billion. If this pace continues, it will exceed the levels seen in 2022 and 2023, the Goldman report found.

“A smaller equity drawdown and the decline in bond yields since October have been the biggest drivers behind the increase in our IPO Issuance Barometer,” Goldman wrote.

“The dovish pivot by the Federal Reserve in late 2023 led to an increase in Fed easing priced by the market and an expansion in equity valuations. At the same time, economic growth has proven to be stronger than expected despite relatively depressed levels of sentiment-linked surveys such as CEO Confidence and the ISM Manufacturing Index.”

Seeking Alpha noted that 154 companies went public in 2023, compared to 181 during the prior year and 1,035 in 2021. That was a historic year for public listings, raising a record $339 billion. Last year, however, that total was just $26 billion.

This year has seen some high-profile firms consider IPOs, while others have decided to call them off. In the latter category, car maker Renault announced recently it was forgoing plans to take its electric vehicle arm public, saying that “current equity market conditions” were not right for an IPO.

Meanwhile, social media platform Reddit is reportedly planning a public listing for March, with potential backers pushing the company to target a listing price of $5 billion.

And last month, stablecoin issuer Circle Internet Financial filed paperwork for an IPO, resurrecting a plan to go public that it had scrapped in 2022.