Reddit, Shein and Stripe may lead a revived IPO market in 2024

By Ciara Linnane and Emily Bary

The U.S. IPO market is expected to stage a rebound after two dismal years with few deals

The U.S. market for initial public offerings is expected to stage a recovery in 2024 from the drought of the last two years, buoyed by expectations the Federal Reserve will switch to a rate-cutting cycle and boost market conditions.

A hoped-for rebound failed to fully take hold in 2023 amid geopolitical uncertainty, interest-rate hikes and bank failures, according to Renaissance Capital, a provider of IPO-focused exchange-traded funds and pre-IPO institutional research.

"We are anticipating a significant rebound in the U.S. IPO market," Renaissance analyst Angelo Bochanis told MarketWatch. "Investors may be encouraged by the prospect of rate cuts, plus the [Renaissance] IPO ETF IPO gained 52% in 2023 and outpaced other benchmarks."

The number of potential candidates has also grown substantially over the past two years, as many startups spent the IPO winter focused on improving profit and cash flow, moves aimed at making them more appealing to investors, he said.

See also: IPO pipeline welcomes some profitable companies, raising hopes for a rebound

Renaissance is expecting 120 to 170 deals in 2024 that will raise between $20 billion and $45 billion. In comparison, 108 deals raised $19.4 billion in 2023.

"We're expecting a return to normalcy, something more like the market before 2020," Bochanis said.

Five of the biggest deals on tap this year are companies that filed to go public in 2022 or earlier but that have kept their filings fresh, which signals they plan to hit the market once conditions look more favorable.

The same sentiment seems true of recent filers that opted to push their deals back to 2024, including UL Solutions (ULS), a testing, inspection and certification company, and Chinese electric-vehicle company Zeekr (ZK).

Both of those deals are expected to raise up to $1 billion. Meanwhile, Renaissance is expecting Kazakh fintech app Kaspi.kz (KSPI) to raise up to $1.5 billion.

For more, see: Fintech Kaspi.kz is set to be first Kazakh company to list in the U.S.

This week saw filings from BrightSpring Health Service Inc., a home-healthcare service provider, and KKR & Co. Inc. (KKR), portfolio company, that could raise up to $1 billion, according to Bochanis.

And on Thursday, Finland-based Amer Sports Inc. filed with 21 underwriters, suggesting that deal will be a sizable one. The owner of sports brands Arc'teryx, Salomon, Wilson, Peak Performance and Atomic was acquired five years ago by a Chinese consortium for about $5 billion.

For more, read: Amer Sports files initial public offering with 21 underwriters and $3.5 billion in 2022 revenue

Add in a few smaller deals and 2024 seems set for a strong start, which should set the market up well for the year ahead, said the analyst.

One key driver would be a reopening of the window for tech deals, a development investors were hoping would materialize late last year when chip maker Arm Holdings PLC (ARM) hit the market in September.

Those hopes faded after the deal gained almost 25% on its first day of trading but swiftly fell below its issue price in the aftermarket. The same fate greeted grocery-delivery app Instacart (CART) and digital-ad company Klaviyo Inc. (KVYO), which made their much-hyped debuts around the same time.

The lackluster performance was repeated by German sandal maker Birkenstock Holdings PLC, another deal (BIRK) that was highly anticipated but remained below its $46 issue price for weeks. That stock was trading at $46.02 on Friday.

The private companies that may come to market this year are unlikely to make the mistake of seeking overly rosy valuations, however. There was a significant decrease in private funding in 2023 and many companies were forced to accept down rounds, Bochanis said.

"As these companies run out of cash and look to take on new investors, that also bodes well for IPOs picking up this year," he said.

The following are some of the buzzier names that investors are awaiting.

Top candidates

Shein: The fast-fashion platform has seen a rapid rise in popularity, and it may soon find out whether it has the same rabid following in the investment community. The company reportedly filed confidentially for a U.S. IPO late last year, with the Wall Street Journal noting that Shein, now based in Singapore, fetched a roughly $66 billion valuation in a 2023 funding round but would likely look for a higher mark with its IPO. Shein declined to comment on its IPO plans.

See now: Why are Shein's clothes so cheap? Some shoppers want the answer - and so do a lot of critics.

Reddit: The social-media company known for its message boards has been doing some work to grow up and make itself more attractive to investors. Reddit several years ago did a "cleanout of earlier communities that were more problematic," EquityZen research head Akshata Bailkeri told MarketWatch. That could make the platform more appealing to advertisers - and to Wall Street. The company was valued at $10 billion after a 2021 funding round. Reddit declined to comment on its IPO plans.

Stripe: No list of IPO possibilities would be complete without perennial candidate Stripe. The payment-technology company's valuation has come down considerably in recent years, falling to $50 billion after a March 2023 funding round, whereas it was valued at $95 billion as of March 2021. Stripe brought on a new chief financial officer last summer who boasts experience at public companies, including Palo Alto Networks Inc. (PANW) and Confluent Inc. (CFLT). Stripe declined to comment on its IPO plans.

Plaid: Financial-technology company Plaid hired an Expedia veteran as its chief financial officer last year, helping to earn it a place among 2024 IPO candidates. The company, which allows financial-services companies to link with customers' banking information, almost got scooped up by Visa (V) several years back, but the two sides called off the deal in January 2021 after antitrust pushback from the Justice Department. Plaid was valued north of $13 billion later that year. "An IPO will be a milestone we consider in the future but have no immediate timeline to disclose," a Plaid spokesperson said.

ServiceTitan: Before the IPO market froze, software companies were among the hottest names to test the public markets. Nowadays, there are a number of more consumer-focused names within the group of leading candidates, but ServiceTitan is one software company that could make a public debut. The cloud-software company targeted at HVAC, plumbing, electrical and other service fields was last valued at $9.5 billion, according to CBInsights. The company didn't immediately return a request for comment on its IPO plans.

Fanatics: The company sits at the intersection of nearly all things sports, with a betting business, a commerce outfit and a collectibles platform among its businesses. It has been beefing up its leadership team and brought on former IAC/InterActiveCorp. (IAC) CFO Glenn Schiffman to serve in the same role at Fanatics in 2021. EquityZen's Bailkeri noted that the company recently brought in a new head for its commercial business, as well. Appointment of a new management-team member is one factor Bailkeri looks at when predicting whether companies are planning to go public. "While an IPO is clearly an available option to us at some point in the future, there has been no change to the timing," a spokesperson said. "Any public offering is just a moment in time as our focus remains on expanding our businesses and building the leading digital-sports platform over the next decade and beyond."

Skims: The shapewear company that counts Kim Kardashian as a co-founder might try its hand at the public markets next year, according to Bailkeri. That would mean "bucking a trend" in the IPO market: Many companies wait "quite a while," sometimes decades, to go public, but Skims is only about five years old, she noted. Skims, like many other names on the list, brought on a new CFO in 2022: Andy Muir, who brings experience working for Nike Inc. (NKE). Skims didn't immediately respond to a request for comment on its IPO plans.

Liquid Death: IPO investors haven't always been so kind to consumer-oriented names, but several such companies might try their luck in the year ahead. One on Bailkeri's list of possibilities is Liquid Death, which makes beverages including Convicted Melon and Berry It Alive. "A lot of people are aware of the brand," Bailkeri said, and it can be easier for companies with name recognition to generate investor excitement. Plus, the company hired a chief commercial officer late last year. Liquid Death declined to comment on its IPO plans.

-Ciara Linnane -Emily Bary

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01-10-24 0807ET

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