The long climb back to relevance continues for initial public offerings in the U.S. in 2024, as investors warm up to new publicly traded companies and IPOs are able to back that sentiment up with sturdier returns.
In the U.S., 80 new IPOs rolled out from January through June, hauling in $17.8 billion in proceeds, according to EY’s Global IPO Trends Q2 2024. The increase in IPOs hit 27% and the amount of IPO proceeds rose 75% year over year.
The median net profit margin of IPO companies in the U.S. was 3% in the first half of 2024, compared with -5% in 2023. There was also a leap in private equity and venture capital-backed IPO proceeds globally, but in the U.S. it was most pronounced, at 74%.
Moreover, the IPOs that entered the public trading sphere took flight, with the average “day one” trading price rising 16.3% and accumulating 23.9% from the IPO through June 17, according to EY.
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Meanwhile, global IPOs fell by 12% in the same period, with valuations down 16% year over year. That scenario was primarily due to better economic and market opportunities in the U.S. than abroad, a situation EY global IPO leader George Chan credited to a “new pendulum of opportunity” in the U.S.
So, where do IPOs go from here in the second half of 2024? Sustained high borrowing costs and suspense over a chaotic U.S. presidential election could slow IPO momentum going forward, but market experts say there are rising expectations for IPOs among investors.
“Money is very expensive now because of high interest rates,” says Julia Khandoshko, CEO at financial services firm MindMoney. “Against the background of expensive funds and very high inflation, only large companies feel good now. IPO markets likely won’t be a priority over large-cap companies until there is a green light from the Federal Reserve and until there is a decrease in rates.”
Regardless, now is the time to start thinking about IPOs, Khandoshko notes. “The U.S. Federal Reserve has less and less chance of not starting to cut rates. The market proceeds from some optimistic scenarios that a rate cut and a general economic recovery will take place in the near future. This will mean that the time has come for companies to launch IPOs,” she says.
In the meantime, investors can start kicking some tires on new IPOs. These recent and upcoming IPOs should top that list:
| Recent/Upcoming IPO | IPO valuation* |
| Astera Labs Inc. (ticker: ALAB) | $5.5 billion |
| Reddit Inc. (RDDT) | $6.5 billion |
| Ibotta Inc. (IBTA) | $3 billion |
| StubHub | $16.5 billion |
| Stripe | $65 billion |
| Shein | $63 billion |
| Skims | $4 billion |
*Estimated IPO valuation for StubHub, Stripe, Shein and Skims; others are initial valuations at the time of the IPO pricing.
Astera Labs Inc. (ALAB)
IPO valuation: $5.5 billion
Astera Labs, specializing in connectivity solutions for AI and cloud infrastructure, went public on March 19 at an opening share price of $36. The stock rose to more than $70 per share in mid-April but has since fallen over 20% as investors have taken a step back.
ALAB has fallen victim to reduced global demand for semiconductors, but its financials look solid, as recorded in the company’s first quarterly report in early May. The company reported strong guidance figures and outperformed expectations in key areas like sales (up 269% for the quarter on a year-to-year basis) and earnings per share (10 cents versus an analyst consensus of 4 cents).
Company officials believe the connectivity chip market is only taking a breather as companies evaluate their expanding need for cloud and AI-based data centers.
“As hyper-scalers embark on a significant transformation of their data centers to support AI applications with increased capital investment, we’re witnessing the emergence of a multiyear growth cycle,” CEO Jitendra Mohan stated in the earnings release.
Industry analysts agree, with Northland Securities’ Gus Richard slapping a “buy” rating on ALAB and a target price of $85 per share. The stock was trading at $60.50 per share as of July 2.
Reddit Inc. (RDDT)
IPO valuation: $6.5 billion
An update on Reddit three months into its IPO is also due. After a sluggish start, RDDT has regained solid footing and is trading up 56.4% over the past three months.
The company raised eyebrows with a new partnership with ChatGPT creator OpenAI that allows Reddit access to ChatGPT communication tools. That should allow Reddit to build new user-friendly social platform engagement features and vastly improve its digital advertising revenue channel, which already flourished at a $223 million clip in the first quarter of 2024. That’s nearly 40% higher than in the same period of 2023.
With about 83 million active users, a new inside-track position as a favored OpenAI partner, and a continuing data partnership with Google, Reddit is operating in a significantly higher gear three months into its IPO tenure, and its skyrocketing share price is showing that it has staying power.
Ibotta Inc. (IBTA)
IPO valuation: $3 billion
Ibotta, a Denver-based digital marketing cash-back rewards service provider, went public in April at an $88-per-share initial offering price. As trading started, the company’s share price shot up to $117 before sliding to $103 per share, for an initial market value of $3 billion. As of July 2, IBTA traded at $70.38 per share and was down 17.9% over the past 30 days.
Despite its recent market slide, Ibotta’s pivot from consumer-facing to a B2B business has been an interesting turnaround story.
“Once they started selling into big retailers like Walmart Inc. (WMT) and Dollar General Corp. (DG), Ibotta saw revenue grow 50%, and they were able to achieve profitability,” says Brianne Lynch, head of market insight at EquityZen, a major pre-IPO trading platform based in New York. “Ibotta uses AI to power its promotion recommendations for brands and ingest retailer information. It will be interesting to see how much credit investors give this AI-related part of their business.”
Ibotta’s pivot to becoming an enterprise software-as-a-service, or SaaS, company has largely contributed to profitability. “SaaS is also an intriguing industry to investors,” Lynch adds. “Enterprise SaaS is among the top five most popular industries amongst private market investors on EquityZen’s platform.”
StubHub
IPO valuation: $16.5 billion
Wall Street is buzzing about a StubHub IPO in 2024, with interest high in the digital event-ticket giant’s profit potential as a publicly traded company.
On June 10, Bloomberg reported an IPO was being “prepared” by StubHub as the company announced it had $350 million in earnings on hand before interest, taxes, depreciation and amortization (EBITDA). The IPO would reportedly be valued at $16.5 billion.
While the ticket provider faces a serious lawsuit over its transactional-fee policy and recently paid $16 million in legal penalties in a separate suit, Wall Street experts say StubHub is ideally positioned for a new IPO.
“StubHub is on our radar after reportedly gearing up for a summer IPO,” says Phil Haslett, co-founder and chief strategy officer at EquityZen. “As a 24-year-old company that consumers know with an understandable business model, StubHub will likely garner interest amongst both institutional and retail investors. The company reported strong profitability in the last calendar year, which will be important for most IPOs to exhibit.”
Stripe
IPO valuation: $65 billion
This San Francisco-based fintech company has long been rumored to go public, with a massive $65 billion valuation. According to a recent Securities and Exchange Commission (SEC) filing, the company also completed a private stock sale that raised $694 million.
Apparently, company management likes what it sees in its financials, which should add fuel to the IPO fire. On March 13, Stripe noted in its annual letter that the 15-year-old company cleared $1 trillion in total payment volume in 2023, up 25% from 2022. Stripe noted that the $1 trillion figure represents 1% of the total global gross domestic product.
Even more important to any imminent IPO, Stripe says it’s “robustly cash flow positive” for 2024. “This threshold is important because it allows us to invest for the long term, building what we believe our users need 10 years from now.”
That sounds very much like a company looking for capital growth, and an IPO would be a great way to provide for that growth a decade down the line.
With major corporate customers like OpenAI and Anthropic using its digital payment technology, Stripe continues to be one of the favorite horses in the 2024 IPO derby. It’s just a matter of getting out of the gate now.
Shein
IPO valuation: $63 billion
In early June, Shein finally revealed its poker hand — to a point — as it filed papers for a potential London Stock Exchange IPO with no specific date.
The Hong Kong-based company has been down this road before. In 2023, Shein filed similar paperwork with U.S. regulators but has since pivoted back to the LSE after several key U.S. legislators balked at a Shein IPO. The problem with that move is the IPO transition requires a listing venue approval stamp from Chinese regulators to move any IPO from the U.S. to the U.K.
The June filing with the U.K.’s Financial Conduct Authority, the U.K.’s primary markets regulator, was a big first step in that process, although there’s no guarantee that Shein will go public.
But, it has a compelling story to tell if and when the company hits the IPO runway.
Shein doesn’t make its hay manufacturing clothes or even storing and selling them in Amazon.com Inc. (AMZN)-like warehouse facilities. Instead, it aggregates data based on consumer retail preferences and ships the information to 5,000 global clothing manufacturers, which sell those $40 suits and $10 jeans on Shein’s platform. The company has 10,000 employees and retail partners in 150 countries.
Skims
IPO valuation: $4 billion
New analyst reports have Skims setting the stage for an IPO in the next six to 12 months, although the retailer has issued no formal statement about an IPO in 2024.
Founded by celebrity Kim Kardashian, Skims has shown its mettle in capital-raising. Since 2019, it has garnered $701 million in five funding phases. Most recently, it raised $270 million in a Series C funding round last July, which helped push the retailer’s IPO valuation to $4 billion.
Kardashian has had a major influence on the buzz surrounding an IPO. Kardashian alone has 362 million Instagram followers, and the company has said it has 11 million consumers who’ve signed on to Skims’ product restock program. That’s an eye-opening number, suggesting Skims’ retail ware is so popular that it is selling out of its products quickly, with shoppers asking for more.
Launched in 2019, Skims is making its IPO case with some big sales numbers, including about $750 million in 2023 revenues, up from $500 million the year before.
Avoid the FOMO Trap
Don’t succumb to a fear of missing out, or FOMO, when looking at recent and upcoming IPOs. Investors shouldn’t look at IPO opportunities in a vacuum and should instead consider how they complement their overall portfolio with a focus on long-term growth. According to Haslett, some questions to ask when considering a new IPO include:
— Does the IPO company offer exposure to an underrepresented sector in my equities portfolio?
— What allocation makes sense, and is it in alignment with my overall asset allocation strategy?
— Does the investment diversify my broader investment portfolio?
— Can it drive growth-stock returns where public market investors are under-allocated?
Another tip is to be wary of AI labels. Every company preparing for an IPO in 2024 will likely weave artificial intelligence into its story to benefit from strong investor demand for the technology.
“We’ve seen that public market investors are willing to give credit to unproven business models or unprofitable businesses if they have an AI component,” Haslett says. “You saw this with the strong investor interest garnered by Reddit’s data licensing partnerships with Google, and the overall opportunity they have with large language models.”
Most pure-play AI companies, however, are still relatively young and less likely to go public in the near term. “The most likely AI-adjacent companies to go public sooner will be chip, data storage and AI infrastructure companies, since these businesses are a bit more mature,” Haslett says.
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Update 07/03/24: This story was published at an earlier date and has been updated with new information.
