Election Shrinks US IPO Window Even as Listing Activity Picks Up

(Bloomberg) -- The US presidential election in November is set to have an impact on the re-awakening market for initial public offerings, squeezing the number of weeks available this year for companies to go public.

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That’s the read from advisers and investors who see the emerging IPO recovery pausing in the weeks surrounding the vote on Nov. 5. Though the break isn’t expected to significantly derail the pace of listings, which have improved on last year’s, it will likely prompt some IPO candidates to adjust their timing.

There could be a “widening of the vacuum right around the election to bring certain deals up and postpone others to the end of 2024 or into 2025,” said Mark Schwartz, Ernst & Young’s Americas IPO and SPAC advisory leader. “Whether there’s a bigger pull forward or a push back really depends on how the narrative continues to develop.”

The potential for an outsized election-year slowdown comes as IPOs are back to a steady clip following an extended drought. Companies this year have raised more than $13.7 billion on US exchanges, lapping the amount raised in the same period in 2023.

Still, IPO volume through the end of April is sitting 92% below 2021’s banner year, data compiled by Bloomberg show, and deal flow may be affected if the election process itself proves controversial rather than the outcome.

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“The election is more of, avoid the two weeks before and after, than who will win,” said Previn Waas, co-leader of Deloitte & Touche LLP’s US IPO services offering. “There will be a lot of noise around that, and an IPO could get lost in the noise.”

The rate of firms tapping public investors for the first time has slowed in November during election years, data analyzed by ICR Capital LLC show. Over the past six presidential election cycles, an average of six IPOs have priced in the month — a 50% drop-off from what’s been seen. Activity increases to compensate in the months immediately beforehand, the data shows.

The broadening of the IPO market is seen by participants as bullish, potentially signaling an increase in activity after September’s Labor Day holiday before the final weeks of October. That said, uncertainty surrounding multiple wars, and a Federal Reserve that’s content to punt on interest rates, remains a threat to the nascent trend.

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“We are continuing a sort of re-emergence,” said Schwartz. “We’re at a bit of a crossroads after real optimism at the beginning of the year with the timing and frequency of expected rate cuts, with the market moves up and geopolitics a bit more stable.”

Founders and companies that wait too long risk sitting out the 2024 calendar entirely, given a narrow window to launch a roadshow after the election before the Thanksgiving holiday. After that, December has historically been a more tame month for new offerings, Bloomberg data show.

Recent debutants have rallied, with Rubrik Inc., the cloud and data security startup backed by Microsoft Corp., climbing 12% after topping its fundraising goal last week. Ibotta Inc. and Loar Holdings Inc. have also gained, reflecting the optimism that has bubbled under the surface.

The emerging consensus is that a potential return to an IPO environment reminiscent of the pre-pandemic years remains chalked up for 2025. That’s partly due to companies coming to terms with shifting valuation expectations, and investors getting more comfortable with taking risks.

“By the time we get into 2025, the global election uncertainty will be off the table, and interest rate clarity will be better,” said Francois Chadwick, partner at KPMG. “The only thing that’s slowing IPOs down is whether they’re capable of being public, and a lot of companies are working on the fundamentals being there.”

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