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The IPO market looks to bounce back in 2024

The IPO market has been a mixed bag this year as many listings displayed generally lackluster performances in raising funds. Hope may be on the horizon for the IPO market as, according to data compiled by Bloomberg, September was a banner month, with companies like Arm Holdings (ARM), Instacart (CART), and Klaviyo (KVYO) debuting on exchanges and raising $7.2 billion dollars. Yahoo Finance's Akiko Fujita and Rachelle Akuffo break down the sentiment for the IPO market going into the next fiscal year.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

AKIKO FUJITA: Well, it is time now for today's chart of the day, and today we're asking the question, is the IPO market back? Well, Wall Street certainly has reason to be optimistic. Companies listed on US exchanges raised roughly $7.2 billion so far in September, according to data compiled by Bloomberg. Arm's mega debut accounts for nearly $4 of every $10 raised in the month, but a boost worldwide hints at better conditions for the public offering market.

That's all assuming central banks don't spoil the run. Rainmaker Securities managing director Greg Martin says that if rates remain stable in 2023, the year could see a solid IPO market established, and 2024 could open the floodgates. Rachelle, you could argue that we've certainly had a good run in the month, but what's interesting to me is that what we have been hearing in terms of this enthusiasm in the public markets doesn't necessarily jive with what we've heard from, for example, VC-backed companies or VCs themselves, who are saying, look, yes, some of these companies, especially those that have high valuations, want to test the markets. They don't necessarily have the balance sheets in place right now for where the market wants it to be.

It's increasingly about profitability, not just about growth, and so you've got to have-- there's a bit of a mismatch that's happening. You know, you could argue that maybe more and more companies are going to start to line up, but those same companies are looking at what happened with Instacart. $39 billion valuation at the private round, a much lower valuation in the public markets.

RACHELLE AKUFFO: That's right. You raise a good point because all IPOs are not created equally, and you mentioned Instacart there. It already has immense competition from the Uber Eats and the DoorDash's of the world, whereas Arm is positioned differently. And when you think of even Birkenstock coming to market as well, these are established brands that perhaps have really carved out their own lane.

Instacart really not as lucky in that regard, didn't have that much of a moat around it, so it'll be interesting to see which ones really pull ahead, which ones have the staying power. Arm, of course, pulling much further ahead, but when you look at Instacart, I don't think they had enough of a moat to really sustain some of this momentum, so hard to really gauge at this point whether, you know, IPOs are back in full form at the moment.

AKIKO FUJITA: Yeah, though, if you look specifically at Wall Street commentary on Arm, you could argue that there's some that are still very skeptical about their ability to compete beyond their core market, which has been in mobile, and whether, in fact, they can bring in revenue on the AI side.