Last year, we saw continued improvement in the IPO market. There are more IPOs, more special purpose procurement companies (SPACs) and IPOs raise more funds than in 2022 and 2023.
Many factors align. First, as inflation returns to around 2%, interest rates begin to fall. In addition, volatility is lower than in 2022 and 2023. This helps the market rise to an all-time high in terms of higher valuations (Figure 1, Purple Line, Cape (CAPE) improves to 2021), which in turn helps improve overall positive investor sentiment. These are all the factors that our IPO Pulse shows are important for a stronger IPO market.
However, from the data, we not only see the number of IPOs, but also consistently improve the rate of return as we enter 2025.
The number of IPOs increased
In the figure below, we use Jay Ritter’s data, a well-known IPO academic scholar with a long history of activity.
His data shows that there are a total of 221 U.S. stock market IPOs in 2024, an increase from 151 IPOs in 2023 and 178 IPOs in 2022. To be fair, we are still significantly below the 2021 High of 2021 High of 1,028, but the IPO market is definitely a rebound.
Importantly, RITTER calculates American depositary receipts (ADRs), companies with IPO prices below $5, suspensions, REITs, banks, unit offers and partners and partners or trusts, or “other” (light green )category. ETFs are not included in the analysis of Figure 1.
Figure 1: New IPO rebounds in 2024
As the year progresses, the decline rate coincides with more IPOs
Recall in 2023, we reached a peak rate, stopping the peak after July 2023. By September 2024, the Fed began to slow down, down 50 basis points (BPS) in September and 25bps in November and December. In total, by the end of the year, federal funding rates fell in full from their 2024 highs.
The IPO market reacted to better interest rate expectations, more than the quarterly IPO quarter, with a high of 76 in the fourth quarter (or October-December). Figure 2 shows:
- Quarterly IPOs continue to increase.
- Expand IPOs to most areas. In fact, 10 of the 11 GIC divisions saw IPOs in the fourth quarter of 2024.
- Interestingly, only the utility sector did not see an IPO in 2024. Despite all the discussion around the power demands of AI data centers, maybe we will see utility IPOs in 2025.
Figure 2: IPOs increase in each quarter of 2024
2024 IPO raised $30 billion
Compared with the previous two years, the capital raised has also increased significantly. The IPO (excluding SPAC) raised $10 billion in 2024 than in 2023 and $24 billion more than in 2022.
The majority of the new IPOs (73%) also chose new homes in Nasdaq, with the total capital raised $15.8 billion on those lists.
Figure 3: Increase in capital raised in IPO
Unicorns are no longer special
It is worth noting that 14 IPOs reached a one-day market value of more than $5 billion, while 5 companies raised more than $1 billion in products – once thought that such a large number was considered a “unicorn” IPO.
The biggest new list of 2024 is Lineage, Inc. (Line), a company that provides temperature-controlled warehouse services, is headquartered in Michigan. Its biggest price increase was $4.4 billion in 2024 and reached a one-day market value of $16.9 billion.
Including other large IPOs: including:
- Kspi – With an IPO price of $92, KSPI has the largest market capitalization of $18.1 billion in 2024, the highest IPO price of the year. KSPI (Kaspi.kz AO) is a Kazakh company that operates payments, markets and fintech platforms.
In fact, more than 90 foreign companies received U.S. IPOs in 2024. This has led to a trend for foreign issuers to choose the U.S. market, which may be attributed to the higher liquidity and lower capital costs in the U.S. market.
Most of the daily returns are positive
Figure 4 below shows the 2024 intermediate date IPO return (sometimes called “IPO POP”). This measures the return on stocks from overnight institutional placement prices to closing prices on the first day of trading.
Not all IPOs are on the rise – but 2024 looks more like most of the past decade. Another sign that the IPO market (and investor sentiment) is improving. In fact, we see:
- 64% of companies have positive one-day returns.
- 36% of companies even have over 10% of IPO POPs.
- Ritter’s data raises the IPO POP in 2024 to an average of 15.3%.
By comparison, when the median IPO POP is basically zero (see through the dark gray box below the axis) and looks familiar with the recovery of the 2008-2009 financial crisis.
Although again, we are not close to the highs in 2020 and 2021, it is common to see a one-day return of 30% or more there.
Figure 4: Distribution of returns on the first day of IPO
Long-term income ratio 2021-2023
For buyers and hold investors, the long-term returns of the IPO in 2024 have also improved, especially compared to the past few years.
The intermediate returns (green lines in Figure 5) for the three months after IPO 2024 performance are much better than in the last two years (purple and pink lines). Importantly, the 2024 IPO has continued for a full day of revenue so far. However, we note that the newer 2024 IPO has not been calculated yet during the longer return period.
Figure 5: 2024 IPO is better than the last three years in the long run
Unicorns improve average returns
Overall, the average return rate for the 2024 IPO was 32% (green line in Figure 6). However, as the chart shows, larger IPOs tend to be better than smaller IPOs. In fact, most unicorns (on the right) outweigh their IPO prices, which is beyond the reach of smaller companies (on the left).
Figure 6: The biggest performance in 2024 receives 200%+ returns at the end of the year
We also color the chart by the scale of sectors and capital raised. This helps show that some departments perform better than others.
- real estate The company (light green) is the best year with an average return of 76% at the end of the year.
- vitality (Gray Point) The average rate of return for the company is also very good.
- Consumer staple food (Purple) By December 31, the lowest average return was -30%.
We also see different demands for capital across sectors:
- Healthcare During the year, the industry (the size of the red dot in Figure 6) surpassed all other sectors, with a total increase of $7.5 billion, but it had an IPO of up to 42.
- real estate (Size of light green dots) Each company has the largest salary increase of $1.1 billion.
- Material The company (Dark Gray) has the smallest growth, with only $44 million in fundraising in all materials IPOs.
Spacs rebound in 2024
While the SPAC boom in 2020 and 2021 seems to be over, new active SPACs are still on the list. In 2024, 58 new spans were listed, with 6 announced agreements so far, while 52 remain active.
However, many spaces from 2021 have also been liquidated – only 46% of them have completed a deal.
Only a few older winter quarters are still active and are looking for deals (orange bars), with a total of 20 in 2022 and 2023.
Figure 7: New SPAC list rebounds in 2024
Although SPAC sizes have not returned to 2021 sizes, they do raise significantly larger capital in 2024. The median SPAC (Figure 8) rose to $168 million, slightly lower than the median $220 million in 2021 and well above the $60 million in 2023.
However, the span is still sized than most of the past decade, looking at the gray box in Figure 8 in 2016-2021, as all boxes are higher than the 2024 box.
Figure 8: The capital raised in 2024 is significantly higher than that in 2023
SPAC price is still around $10
Trading without Active Spac is below $9.92, with an average Active SPAC trading of $10.46. Most activities have vacant spaces for exactly $10 (the orange circle to the left of Figure 9).
The average price of SPAC that announced a deal was $11.43, while the transaction price of no deal was nearly one dollar, while the transaction price was less than $10.07. The active space takes one to three years to find a protocol, about half the time is two to three. Typically, SPACs give themselves a two-year period to find and complete a DE-SPAC, sometimes three, which is why many of the 2021 SPACs that were not found in Figure 7.
Figure 9: The price of active SPAC held is about $10
Overall, IPO data looks better
All IPO indicators improved last year, which shows that the IPO market is certainly rebounding. We see better day-to-day returns than in 2022 and 2023, with longer positive returns after IPOs, more capital raised and more IPOs throughout the year.
Major IPO improvements in 2024 should continue until 2025. We wrote two weeks ago that in 2024, the United States led the world with a new IPO, and we believe that the IPO revival will likely continue until 2025.
Nicole Torskiy, Senior expert in economics and statistical research, contributed to this article.
