WEBVTT - An Optimistic Outlook for IPO Market

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Tim Stenebek on Bloomberg Radio.

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<v Speaker 2>No, it's often missing from Charlie's updates.

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<v Speaker 3>What talk of IPOs, Well, that's missing from pretty much

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<v Speaker 3>everything lately.

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<v Speaker 2>It has not been a happening scene. Although there was

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<v Speaker 2>a couple of stories today, arm which is of course

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<v Speaker 2>backed by SoftBank, in talks with Nvidia to join maybe

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<v Speaker 2>a group of investors potential investors to anchor it's IPO,

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<v Speaker 2>that's according to FT. And then you had JBS, the

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<v Speaker 2>world's largest meat supplier, filing with the SEC that it

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<v Speaker 2>is actually finally, finally, finally moving ahead with its long

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<v Speaker 2>delayed plan to list on the NYSESE. So maybe things

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<v Speaker 2>are starting to move a little bit.

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<v Speaker 3>Maybe. But I like to type IPO, go on my

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<v Speaker 3>Bloomberg terminal and what do you say? And then click

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<v Speaker 3>on time series and deal count, and I see that

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<v Speaker 3>in the let's say, fourth quarter of twenty twenty two,

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<v Speaker 3>we had four hundred and fifty nine IPOs, and in

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<v Speaker 3>the first quarter of twenty three we had three hundred

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<v Speaker 3>and fifteen IPOs, And that has been kind of the trend.

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<v Speaker 2>Yeah, it's it's like pretty shocking how much it's down. Hey,

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<v Speaker 2>so let's see what Rachel Gering is seeing. She's Ey

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<v Speaker 2>America's IPO leader. She's with us on zoom from Nashville, Tennessee.

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<v Speaker 2>So Rachel, good to have you back again. Has your

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<v Speaker 2>team just said, listen, go take like a six month

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<v Speaker 2>vacation and come back in twenty twenty fourth and she'll

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<v Speaker 2>be a better what's it like? Tell us about the environment.

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<v Speaker 1>Well, it's definitely a bit chilly out there, but we're

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<v Speaker 1>not packing up and taking long vacations by any means.

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<v Speaker 1>There's continues to be strong interest of companies interested in

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<v Speaker 1>IPOs and planning to ipo when the market's right for them.

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<v Speaker 1>But there's definitely very much a wait and see atmosphere continuing.

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<v Speaker 1>But we're hearing good news even today that hopefully will

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<v Speaker 1>just help build and continue building some momentum that we

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<v Speaker 1>need to see that open up the IPO market.

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<v Speaker 3>What is the problem right now? Why don't investors want

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<v Speaker 3>to see IPOs? This market has been fantastic if you

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<v Speaker 3>look at the gains that we've had. It's not only

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<v Speaker 3>the Nasdaq, the S and P in the Dow Jones

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<v Speaker 3>are up this year as well, why don't people want

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<v Speaker 3>to buy new companies?

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<v Speaker 1>Well, I think there's a multitude of factors, and some

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<v Speaker 1>of it is also driven by valuation. Investors are willing

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<v Speaker 1>to invest in the asset class, but not at any price.

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<v Speaker 1>So there's still that tension between what a company is

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<v Speaker 1>needing and wanting from evaluation versus what investors are willing

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<v Speaker 1>to pay. So that's still working its way out. We're

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<v Speaker 1>still we're seeing some good deals occurring, even you know,

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<v Speaker 1>recently in Q two, so you know, through through the

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<v Speaker 1>first half of twenty twenty three in the US, we're

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<v Speaker 1>at about sixty three IPOs. Q one to Q two

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<v Speaker 1>was relatively flat and volume, but proceeds more than doubled

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<v Speaker 1>in just Q two, largely one IPO raising four point

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<v Speaker 1>four billion in May. But we're starting to see some

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<v Speaker 1>strong deals, some strong valuations. These companies need to perform

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<v Speaker 1>price well and then perform in the aftermarket and that

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<v Speaker 1>will hopefully drive continued interest from investors.

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<v Speaker 2>Rachel. It's interesting. We had on an individual who's been

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<v Speaker 2>in the real estate for a long time, and she

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<v Speaker 2>basically just is saying that sellers maybe have to come

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<v Speaker 2>down a little bit in the real estate market that

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<v Speaker 2>they think, Okay, I'm really worth this, and buyers are

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<v Speaker 2>saying nope, not even And so there needs to be

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<v Speaker 2>a bit of a reckoning in terms of those individuals

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<v Speaker 2>or those companies looking to go public. Do they need

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<v Speaker 2>to have a little bit of a reckoning about valuations

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<v Speaker 2>and maybe lower their expectations and that's ultimately what will

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<v Speaker 2>open up the IPO market.

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<v Speaker 1>There is definitely that occurring in that reckoning, as you mentioned.

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<v Speaker 2>But does it need to happen even more? That's what

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<v Speaker 2>I guess I'm asking.

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<v Speaker 1>Yes, it'll need to happen an even more. But then

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<v Speaker 1>also the macroeconomic backdrop, we need to continue seeing the

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<v Speaker 1>improvements that we're starting to see, but we need to

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<v Speaker 1>see those sustained to also get companies interested in entering

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<v Speaker 1>the market. So the inflation news from today is definitely positive.

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<v Speaker 1>Volatility is back to pre COVID lows, you know, interest

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<v Speaker 1>rate hikes are starting to slow, hopefully they're coming to

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<v Speaker 1>an end. So those factors also are influencing companies coming

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<v Speaker 1>to market, and they're just willingness to given just the

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<v Speaker 1>unpredictability that has been occurring over the last several quarters.

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<v Speaker 3>I mean, Rachel I look at the IPO pipeline in

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<v Speaker 3>my mind and I see it, you know, getting ready

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<v Speaker 3>to burst. We have private equity women and men in

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<v Speaker 3>this studio and over the past few months they've been

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<v Speaker 3>genuinely frustrated because they don't see any movement. They want

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<v Speaker 3>to have exits and if they don't have those, their

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<v Speaker 3>business model is in deep trouble. So there must be

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<v Speaker 3>a lot of companies that are ready when the time

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<v Speaker 3>is right to go public.

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<v Speaker 1>Absolutely, which is why you know, myself and my team

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<v Speaker 1>we haven't taken a vacation, as we were joking earlier.

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<v Speaker 1>There are definitely companies. The pipeline is strong, and there's

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<v Speaker 1>still high interest. It's just more around the timing that's

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<v Speaker 1>right for the organization and valuation.

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<v Speaker 2>Well, and it's interesting, but is it tougher. I mean,

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<v Speaker 2>we've talked about the benefit of startups is you know,

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<v Speaker 2>there is a lot of money slashing around in the

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<v Speaker 2>private world and private markets that they have the luxury

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<v Speaker 2>of staying private for a lot longer. Do you continue

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<v Speaker 2>to see that trend as well? That that's and some

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<v Speaker 2>would say that's a benefit. It gives them time to

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<v Speaker 2>really develop, really become a profitable company. So that when

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<v Speaker 2>they do maybe ultimately do their exit in the public markets,

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<v Speaker 2>they're a viable company.

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<v Speaker 1>Yeah, we're still seeing some slowness even in the private

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<v Speaker 1>financing side. There's a lot of dry powder out there.

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<v Speaker 1>But investors are discerning and they are being They are

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<v Speaker 1>looking for the right companies to invest in. For the

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<v Speaker 1>For the larger, more pre ip companies, a lot of

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<v Speaker 1>them took advantage of the market in twenty one and

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<v Speaker 1>so they probably do have enough capital to sustain, so

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<v Speaker 1>they're not looking to needing to raise proceeds immediately, largely

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<v Speaker 1>because they took advantage of the market, you know, well

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<v Speaker 1>over a year ago.

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<v Speaker 3>Are there any other exits that have kind of taken

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<v Speaker 3>up the slack? Are there any other liquidity events as

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<v Speaker 3>some people call them, that are taking up the slack

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<v Speaker 3>of the lack of IPOs.

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<v Speaker 1>Well, you know, the other thing we're seeing even in

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<v Speaker 1>the IPO market and so forth, is just from the corporates.

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<v Speaker 1>Corporates are actively exploring ways to unlock value as well,

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<v Speaker 1>and so we started to We've seen a couple now

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<v Speaker 1>spin transactions coming out of the corporates, and we expect

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<v Speaker 1>to see more of those in the pipeline as well.

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<v Speaker 2>What about when you talk about that there's a lot

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<v Speaker 2>of interest in companies. I guess talking with you and

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<v Speaker 2>your team about wanting to go public, what types of

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<v Speaker 2>companies in terms of sizes, valuation, And I'm really curious

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<v Speaker 2>about industries, like are you seeing all of a sudden

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<v Speaker 2>a surge in AI type companies that want to go public?

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<v Speaker 2>They're just kind of waiting. So can you walk us

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<v Speaker 2>through some of that specificity.

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<v Speaker 1>The interesting point is even what we're seeing with the

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<v Speaker 1>completed IPOs occurring now and then the companies that we're

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<v Speaker 1>working with in the pipeline across all sectors. You know,

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<v Speaker 1>the volumes are still being driven off of technology in

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<v Speaker 1>life sciences, but the larger deals are occurring, you know,

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<v Speaker 1>across retail, consumer, energy, financial, so forth. So we're seeing

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<v Speaker 1>a good variety across sector. And what investors are are

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<v Speaker 1>definitely focused on are profitability. So it's not growth at

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<v Speaker 1>all costs, but it's growth and profitability. So those more

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<v Speaker 1>mature companies that have a longer track record are those

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<v Speaker 1>that we're seeing, you know, probably will come to continue

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<v Speaker 1>coming to market in these earlier stages.

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<v Speaker 3>Rachel, what do you expect for next year? Do you

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<v Speaker 3>think it's going to be a better year or are

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<v Speaker 3>you worried that a recession is going to make it worse.

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<v Speaker 1>We're optimistic. We think that activity will if we continue

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<v Speaker 1>to see the improved macro economic backdrop that we talked about.

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<v Speaker 1>If that continues to improve and even you know, get better,

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<v Speaker 1>then I think the back half of this year and

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<v Speaker 1>then definitely twenty twenty four is going to be a

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<v Speaker 1>really promising year for IPOs.

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<v Speaker 2>All right, interesting stuff. We will certainly be on it, Rachel.

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<v Speaker 2>Thank you so much. Rachel Goering, she's IPO leader of

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<v Speaker 2>u I Americas. On zoom from Nashville, Tennessee.