Yahoo Finance The 'real IPO reopening' is coming in 2024: Goldman Sachs
Earlier this year investors speculated that large initial public offerings from Arm (ARM) and Instacart (CART) would bring the return of IPOs.
About two months since Arm's IPO, that hasn't materialized. But a rebound could be coming soon.
"We’re more optimistic about the real reopening of the IPO market in 2024 than in 2023," Goldman Sachs asset management global co-head of private equity Michael Bruun said Tuesday.
Bruun's case for IPOs to reemerge stems from a core stance repeated throughout Goldman's 2024 outlook roundtable on Tuesday: The Federal Reserve will cut rates in 2024. And history says that's usually an opportune time for the IPO market.
"When expectation moves such that people are anticipating rate declines and are starting to see rates come down, that’s usually when IPOs open up," Bruun said.
Bruun's colleague Ashish Shah noted on the call that the Fed is "very likely done" raising rates, a narrative that was increasingly priced into markets in the week following the Fed's November meeting.
Investors have been shifting their bets on Fed rate cuts, too. The market sees a 52% chance the central bank cuts rates at least once by the end of the May meeting, per the CME Fed WatchTool. A month ago, markets had priced in just a 32% probability of a cut by that time.
The Fed's own projections show cuts likely starting in 2024.
A resurgence of IPOs would be a major moment for a market that's struggled since its boom in 2021. After more than 100 deals in back-to-back quarters in 2021, deals significantly slowed in 2022 and have only shown small signs of a resurgence in 2023.
Many large companies remain in the private market to date, including TikTok's parent company ByteDance, Elon Musk's SpaceX, and financial services giant Stripe.
Josh Schafer is a reporter for Yahoo Finance.
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