Equity Capital Markets 2023 Review and 2024 Outlook


Equity capital markets activity rebounded in 2023 with IPO, follow-on, block trade and convertible volume up ~70% over 2022. Reception for new issues, particularly in Q4, were aided by a more constructive market backdrop with all major equity indices up over double digits and volatility declining to two-year lows. The VIX index averaged 16.9 in 2023 vs. 25.6 in 2022 and closed the last 7 weeks below 15. VIX levels below 20 are generally viewed by ECM professionals as highly supportive for the new issuance market. The IPO market saw $19bn in volumes vs. just $7bn in 2022 as investors showed renewed interest in IPOs. The majority of IPOs in 2023 had stronger financial metrics with 13 of the 17 (non-biotech) IPOs having positive EBITDA. On the follow-on and block side, ~$100bn priced in 2023, up 49% vs. 2022. Sponsor monetization activity increased with ~$54bn in secondary proceeds raised compared to $20bn in 2022. The convertible market also returned to normalcy in 2023 with $55bn of deals – still far below the blockbuster issuance levels in 2020-2021 but nearly double the 2022 levels.

“2023 was a ‘rebuilding year’ year for the equity capital markets. While activity showed a strong recovery compared to 2022, new issuance across follow-ons, block trades and IPOs remained below historical averages. For example, the $100bn priced in the follow-on and block trade markets is about 35% below the 2015-2019 average of ~$150bn per year, and IPO activity of $19bn was below the normalized annual issuance level of nearly $40 billion. That said, we are very optimistic for the positive momentum from 2023 to continue into 2024,” remarked Lindsay Hyde, Managing Director ICR Capital.

“The equity markets ended the year on a high note with the S&P 500 just 60bps under its all-time high and all three major indices (Dow, S&P 500 and NASDAQ) tallying nine consecutive weeks of gains into year-end. With inflation decelerating in the second half of the year, the equity markets surged on expectations for rate cuts in 2024 and importantly that the Fed may achieve a ‘soft landing’. This backdrop bodes well for the new issue market, and given the preparatory activity we are seeing, 2024 should be active,” added Lee Stettner, Co-Head of ICR Capital.

“It’s a similar story on the convert side. 2024 is likely to be an even busier year as maturity towers in the straight debt and convertible markets encourage issuers to look at our market for interest savings,” said Syed Raj Imteaz, Head of Convertible and Equity Derivatives Advisory at ICR Capital. “Our convertible advisory dialog with clients is more active than ever, and we expect the trend of higher quality companies accessing the convertible market to continue in 2024.”

“Further, there are a number of IPOs on the runway for the first half of 2024. Most are lining up for the April – June window following the completion of the 2023 audit,” noted Steve Parish, Co-Head of ICR Capital. “The second half of the 2024 is also expected to be active for overall issuance. It may be a surprise to some that historically, the IPO market has been extremely active in late Q3 and Q4 during Presidential Election years.”

“With the IPO process getting elongated during the last two years, many of these potential issuers had the opportunity to build strong relationships with the investor community through institutional investor meetings during roadshows and conferences. Enhanced connectivity between investors and management teams should lead to more positive IPO outcomes,” stated Ashu Vats, Managing Director ICR Capital.

Overall, ICR Capital is optimistic that the recent market trends will allow equity and equity related issuance to revert to normalized levels in 2024. ICR Capital is seeing an acceleration of IPO preparatory processes, as well as, financial sponsors looking to evaluate their 2024 monetization options. The ICR Capital team is eager to discuss capital markets objectives with corporate management teams and financial investors.

For full details, download the complete report.