What will it take for the IPO market to return?

Q1 2023 IPO markets slowed with 33 IPOs on US exchanges, but optimism remains for the remainder of 2023.

In summary

• In Q1 2023, both the number of IPOs in the US and the amount of proceeds raised were generally in line with Q1 2022, but they were well below levels seen in comparable periods over the last decade.
• For the US IPO market to rebound, the first wave of IPOs will need to come to market at reasonable valuations, price well compared to their marketing ranges, and trade well in the aftermarket.
• In light of the prevailing market uncertainty, companies should focus on cash flows, profitability and liquidity, as well as strategically preparing for open market windows.

US IPO deal count and proceeds

In Q1, there were 33 IPOs on US exchanges. Only eight of the US IPOs raised more than $50m, and the largest US IPO raised just over $700m. While there was some optimism that deal activity would rebound at the beginning of the quarter, the pace of transactions began to slow in February, when audits went stale, and never picked back up in March.

Despite the ongoing uncertainty around the macroeconomic and geopolitical environment, the IPO pipeline continues to build, and a number of key factors provide hope for a turnaround later this year.

“IPO activity has been light so far this year, but we are encouraged by some signs of stabilization or improvement in inflation readings, market volatility, earnings estimates and valuation multiples,” says Mark Schwartz, Americas Capital Markets Advisory Leader. “Greater clarity and certainty in these areas could provide a stronger backdrop for a return of the IPO market as soon as later this year.”

Six factors that could improve the IPO market backdrop