Market Reopening
After nearly two years of dormancy, the IPO market began showing encouraging signs of life in Q4 2024. Several high-profile companies successfully priced offerings, investor demand returned for quality businesses, and the pipeline of companies preparing to go public expanded significantly.
Recovery Indicators
- Successful Pricings: Over 15 companies raised more than $500M each in Q4, with most trading above offer prices
- Strong Performance: Average return for 2024 IPOs through year-end was +18%, vs -12% for 2022 cohort
- Pipeline Building: Over 200 companies filed confidential S-1 registrations, setting up robust 2025 calendar
- Valuation Discipline: Most offerings priced 20-30% below their last private rounds
What Changed
- Rate Stability: Fed's "higher for longer" stance provided certainty investors needed
- Market Recovery: S&P 500 gained 24% through 2024, creating positive sentiment
- VC Distribution Pressure: Limited IPO activity from 2022-2023 created urgency for liquidity
- Quality Focus: 2024 IPOs featured more mature businesses with clearer paths to profitability
Standout Sectors
- AI & Enterprise Software: AI-focused companies commanded premium valuations at 15-20x forward revenue
- Healthcare & Biotech: Biotech IPOs returned after three-year drought, especially obesity drug developers
- Fintech (Selective): Profitable fintech with differentiated products succeeded at lower multiples than 2021
- Consumer (Cautious): Required strong profitability and defensible moats, not just brand strength
Allocation Dynamics
Access to IPOs evolved in 2024:
- Institutional Dominance: Hot deals remained dominated by long-only funds and hedge funds
- Retail Access Expanding: Some underwriters increased retail allocations to 10-15%
- Friends and Family: Companies reserved 5-10% for employees and customers
- Secondary Market: Buying post-IPO often proved successful as many had multi-day rallies
Investment Considerations
- Lock-Up Expirations: Insider restrictions typically expire 180 days post-IPO
- Quiet Period: Underwriters can't publish research for 40 days post-IPO
- Earnings Volatility: Newly public companies often see significant reactions to first reports
- Timing: Waiting 3-6 months post-IPO often provides better entry points
Sources: Renaissance Capital IPO Index, Dealogic IPO data, company prospectuses