Corporate finance experts say that going public is still attractive this summer, but this sentiment doesn’t extend to a billionaire hedge fund manager’s recent IPO attempt.
By late July, several companies looking to go public were presenting a much different picture than the one billionaire Bill Ackman portrayed on social media.
Ackman, founder of Pershing Square Capital Management, made headlines on July 31 when he announced that he was abandoning plans for an initial public offering (IPO) of his new firm, Pershing Square USA (PSUS). In a statement on X.com, Ackman acknowledged the high level of investor interest but noted a key concern: whether investors might be better off waiting to invest in the aftermarket rather than in the IPO. This concern prompted him to reconsider PSUS’s structure and postpone the IPO until a revised transaction plan could be presented.
This decision followed a dramatic scaling back of the IPO’s target from the initially suggested $25 billion to a more modest $2 billion. Such a significant revision typically signals either a major issue or a market adjustment, according to Carl Niedbala, co-founder of risk management firm Founder Shield. Niedbala expressed skepticism about whether this situation indicated a broader trend.
The scaling back of Ackman’s IPO plans was highlighted by reports that fellow billionaire investor Seth Klarman, who had been expected to invest, ultimately withdrew his commitment.
Despite Ackman’s challenges, other companies have had successful IPOs. For instance, Lineage Inc. raised over $5 billion and began trading 12% above its offer price as of July 30, marking it as the largest IPO of 2024. EY’s Global IPO Leader George Chan noted that Lineage’s performance reflects a “particularly active” July.
Chan also pointed to the successful $564 million listing of KKR-backed OneStream Inc., which priced above its initial range and is trading 40% above its offer price, and Concentra Group Holdings, which raised about $529 million. Chan emphasized that while valuations are more moderate compared to the peaks of 2020 and 2021, this indicates a balanced approach with sustainable pricing levels.
Despite some positive activity, global IPO volume fell by 12% in the first half of the year compared to 2023, with proceeds down by 16% year-over-year, according to EY. This decline is largely attributed to weak IPO activity in the Asia-Pacific (APAC) region, particularly Greater China, which has historically been a major contributor to global IPO activity.
In contrast, the Americas and Europe, the Middle East, India, and Africa (EMEIA) saw significant increases in IPO activity. EMEIA experienced a 45% rise in IPOs and an 84% increase in proceeds, while the Americas saw a 14% increase in IPOs and a 75% rise in proceeds. APAC, however, faced a 42% decline in IPO numbers and a 73% drop in proceeds.
Ryan Coombs, a partner at O’Melveny’s Capital Markets Practice, noted that July marked a strong start to the second half of the year. He doesn’t believe global IPO statistics fully reflect the health of the US IPO market and expects more US IPOs in 2024 compared to 2023. Coombs anticipates that factors such as the US election and interest rate changes may influence the market, but he expects the robust US IPO activity of the first half of 2024 to continue through the year.
Coombs believes that the US IPO pipeline will likely maintain its focus on companies with solid financials and clear growth prospects.
