The IPO market is still down, but EY says an upswing could finally be on the way

With companies like Cava Group and Savers Value Village hitting the public markets in recent weeks, it may feel like IPOs are seeing a resurgence after seemingly going dormant for the past year or so. But the most recent Global IPO Trends report from EY, which covers the second quarter of 2023, throws cold water on that notion.

Despite a couple of IPOs making headlines, the report says, overall IPO activity in the U.S. remains subdued.

Globally, there were 310 IPOs during Q2 2023, a decline of 3% year-over-year, with proceeds totaling $39 billion, a decline of 5%. In the Americas, specifically, there were only 34 IPOs during the quarter (31 in the United States), a decline of 17%, although proceeds tallied $6.3 billion, an increase of 151%, mostly due to a few large deals making it over the finish line. Interestingly, year-to-date, there have been 77 IPOs in the Americas—the exact same as last year at this point in time. 

For comparison, more than 1,000 companies went public in 2021. This year’s tallies have shown a massive decline as companies adjust to higher interest rates, supply-chain difficulties, and geopolitical changes. 

But despite the relatively lackluster IPO numbers for the first two quarters of 2023, EY’s team says there is reason to think that the IPO market could pick up steam later this year. For instance, the VIX (a measure of market volatility) is trending near record lows, the rate of inflation continues to fall, and the stock market is holding steady—the S&P 500 is up roughly 15% year-to-date. In all, we could be looking at a more inviting environment for companies thinking about going public.

“Despite the continued slow pace of IPOs, recent improvements in market sentiment and the uptick in follow-on activity could be a harbinger of brighter days in the IPO market later this year or next year,” says Mark Schwartz, EY Americas IPO and SPAC Advisory Leader, in a statement provided to Fast Company. 

Nobody knows what will happen for sure, of course, as there are still many rather pessimistic takes about the state of the economy. With the Fed signaling at least two more interest rate increases this year, it’s entirely possible that economic conditions could worsen in the U.S., and that the stock market—and IPO market, accordingly—could feel the squeeze in the fall or winter. 

The successful debut of restaurant chain Cava Group a few weeks ago—its share prices soared more than 100% after its listing—could be construed as a sign that the market is hungry for fresh meat. Companies wishing to go public but staying in a holding pattern due to the economic environment may, as a result, rethink their positions.

“In this shifting environment, companies need to prepare now to be ‘IPO-ready’ for any forthcoming windows,” said Paul Go, EY’s global IPO Leader, in a statement included in the report.