IPO Market Springs to Life: New Hope Amid Changing Investor Sentiments
June 28, 2023
In the past 18 months, the Initial Public Offering (IPO) market remained largely inactive. Rising interest rates led investors to discard growth-oriented companies, focusing instead on more profitable alternatives. However, the tide appears to be turning. As investor sentiment shifts, public listings are regaining momentum, causing renewed excitement. This rejuvenation was evident in the recent IPO of the Mediterranean restaurant chain, Cava (CAVA), which saw its stock price soar by 107% above the initial pricing in less than two weeks.
What’s Cooking in the IPO Kitchen
Making its market debut today is the Korean BBQ conglomerate GEN Restaurant (GENK), which aims to emulate Cava’s triumph. Though it’s a comparatively smaller IPO, this week is set to witness four other listings, each intending to generate over $300M. The largest among them is Vesta Real Estate (VTMX), a firm involved in developing and managing industrial properties in Mexico. However, SA Investing Group Leader Donovan Jones advises caution regarding Vesta due to the peso’s historic depreciation against the dollar. Other noteworthy IPOs to keep an eye on include Texas-based natural gas compression company, Kodiak Gas Services (KGS), for-profit thrift store operator Savers Value Village (SVV), and specialist insurer and reinsurer Fidelis (FIHL).
A Diverse Landscape
The expansion of the IPO market is evident, as the upcoming IPOs span a range of sectors. Dialogues across exchanges are heating up, probing the ideal time to dive in. “My phone is already ringing,” shares NYSE (ICE) President Lynn Martin, hinting at burgeoning opportunities. She remains hopeful, buoyed by the growing interest from institutional investors and a notably positive response towards a specific industry.
Investors seeking to broaden their exposure to the IPO market have promising prospects. The Renaissance IPO ETF (IPO) has posted a 32% return this year, outperforming the S&P 500’s 14% gain. Renaissance Capital reports a 21% year-over-year increase in US IPOs, with 46 companies going public so far this year. These firms have collectively raised $7.6B in proceeds, a robust 91% increase from the previous year. The Federal Reserve’s recent decision to postpone a rate hike in its June meeting, combined with its signaled intent to ease the pace of future hikes, offers additional encouragement. As many downtrodden names on Wall Street show signs of recovery, investors might be eager to capitalize on discounts or bargains on new shares.