NEW YORK: The pricing of Lineage Inc’s US$4.4bil first-time share sale helped make last week into the busiest for US initial public offerings (IPO) in two and a half years.
That excitement will be short-lived, according to bankers, who predict the rest of the summer will be more subdued.
There was US$6.1bil worth of IPO activity in the United States last week.
Levels were boosted by temperature-controlled storage giant Lineage’s upsized offering and KKR & Co-backed software company OneStream Inc’s pricing above its marketed range to raise US$490mil.
It was the busiest week of IPO activity since the week of Dec 6, 2021 when US$8.1bil was raised, beating even the week in September when companies including Arm Holdings Plc raised US$5.9bil in total.
But there isn’t much to fuel this momentum, with no sizable IPO in sight until after Labour Day.
“IPO activity is likely to be more muted through August,” said Rob Stowe, head of Americas equity capital markets at Barclays.
“But the five or six weeks after Labour Day should be a fairly active window, if the market holds. My gut is, it gets quiet,” said Becky Steinthal, head of technology, media and telecom equity capital markets at Jefferies Financial Group Inc.
“Many companies had their eye on the beginning of 2025, that seems to be pushed back six months.”
If IPOs slow down as predicted, companies’ follow-on offerings and investors’ secondary sales will likely take centre stage, as companies come out of earnings.
Already, private equity firm Thoma Bravo priced the sale of US$2.7bil worth of Nasdaq Inc shares on Monday, in the fourth-largest sale of shares in an already-public company this year.
IPOs in the United States have been on a steady path to recovery, with US$28.4bil raised so far this year. That’s almost double the volume for the same period in 2023, even though the level of activity is still below the pre-pandemic average.
Last week’s four sizable IPOs were particularly encouraging to market players.
Three – Lineage, OneStream and Latam Airlines Group SA – traded up on their first day, even against the backdrop of a tech selloff where the Nasdaq 100 Index lost US$1 trillion in market value.
Lineage is holding 7% above its IPO price, despite the offering size being 20% larger than originally intended.
It’s encouraging to see interest in IPOs hold up despite last week’s rotation out of large-cap tech and into smaller stocks, said Barclays’ Stowe.
OneStream was the best performing of the four that listed last week.
It jumped 34% on its debut, lifting its valuation to a tad over US$6bil, or above the last valuation mark it received in a 2021 funding round.
The stock continued to move up, to nearly 40% over its offer price during Monday’s trading.
“OneStream was priced conservatively compared to close peers, and it was an IPO down-round, but clearly that paid off,” said Matthew Kennedy, senior strategist at Renaissance Capital. — Bloomberg
