The first half of 2024 saw a resurgence in equity issuance, contrasting with the prolonged slowdown in activity since late 2021. Companies and sponsors have capitalized on favorable market conditions, with a general consensus that the market backdrop is constructive, and investors are receptive to new opportunities. The increase in issuance was underpinned by equity indices trading near all-time highs (the S&P 500 reached 31 all-time highs in 1H 2024) and the VIX remaining consistently below 20 (hitting a new low of 11.86 at the end of May).
With 37 IPOs raising over $18 Billion, IPO activity hit a two-year high but still remains below historical levels. Despite a mixed bag of pricing outcomes, companies across sectors, market caps and financial profiles were able to execute offerings successfully.
Review our 1H 2024 Equity Capital Markets Review for full details on equity capital markets performance and the outlook for 2H 2024.
Given the market strength over the last six-months, we have heard from many companies considering an IPO. Below are some of the key questions companies have been asking as they begin working towards an IPO:
How can management teams focus on an IPO process while being fully consumed by running the business?
- IPO processes are time intensive, especially as management teams need to focus on executing on the business strategy. IPOs require management teams to commit a large portion of their time to diligence, document drafting, dry-runs and investor meetings. Hiring an independent advisor such as ICR Capital helps management teams better allocate resources and direct key personnel to critical workstreams.
When should companies engage with investors?
- Investor engagement is important – recent IPOs have conducted 2-3 rounds of Testing the Waters meetings before the roadshow. In many cases companies are participating in meetings through conference participation and non-deal roadshows even before hiring underwriters and kicking off the formal IPO process. Beginning the dialogue early and maintaining that dialogue is key to building relationships and a track record with key public investors ahead of soliciting investments during an IPO roadshow. For early stage meetings, ICR Capital works with issuers on creating an overall engagement plan, materials and message.
How should I think about selecting underwriters to lead my deal?
- Syndicate selection can get complicated – weighing the importance of bankers, equity capital markets professionals, research analysts and the broader firm’s relationship can be confusing. Your lead banks should have strong capabilities in 1) document drafting and telling the equity story (investment bankers), 2) IPO execution and investor relationships (equity capital markets), and 3) research platform and voice to the market (research analysts). Meeting with the right parties at the right time ahead of a formal bake-off will provide additional context around each bank’s experience, structure and capabilities. ICR Capital has expertise in working with companies to ensure they are achieving a syndicate that is well aligned across execution strengths and is properly incentivized.
How can a company determine its readiness and the right time to start an IPO process?
- There is no definitive answer of when a company is “ready” to start an IPO process. The key is to start early – starting early provides optionality and flexibility throughout the full process. On the business front, companies typically begin considering an IPO once they have achieved sustainable growth, scale, market penetration and potentially a path to profitability (if not already profitable). From a finance and organizational perspective, having the right c-suite personnel in place, established financial processes (close to what is expected as a public company), audited financials, and the right systems in place are key. Preparing 18-24 months ahead of pricing an IPO provides companies with enough time to be measured and thoughtful around their IPO readiness strategy.
Looking ahead – we anticipate 2H 2024 into 2025 to remain active on the issuance front. Q3 2024 is already off to a strong start with multiple IPOs launching and pricing in the first 3 weeks. Get the full review of the equity capital markets activity during the first half of 2024—download our new report.
The ICR Capital team remains in active dialogue across the full ecosystem and is partnering closely with boards and management teams as they prepare for an IPO. If you are contemplating an IPO or any other type of equity offering, get in touch with our team.
