The Diligent team

GRC trends and insights

2024 IPO trends: An overview for legal professionals & corporate secretaries

As we step into 2025, understanding IPO trends is crucial if you're preparing for an initial public offering in the next 12-18 months. 2025 promises a dynamic shift in the IPO landscape, influenced by a range of economic, technological, and regulatory factors. This overview will delve into the latest IPO market trends, offering insights and strategic guidance for legal professionals navigating this complex and high-stakes process.

Current IPO market trends

Increasing activity in the technology and healthcare sectors

The technology and healthcare sectors continue to dominate IPO activity, driven by rapid innovation and high investor interest. In the second half of 2024, these industries are expected to see a significant number of new listings. BrightSpring Health Services, Perceptive Capital Solutions Corp., Revolut, and BMC Software are examples, with companies leveraging advancements in AI, biotech, and digital health to attract substantial investments.

IPOs are up despite the economic slowdown

In H1 of 2024, there have been 107 IPO filings on the US stock market, compared with a total of 154 IPO filings in the whole of 2023. This suggests that IPO filings in 2024 are set to surpass 2023 by some margin, partly due to the recovery from the economic slowdown and the surge in tech-driven market opportunities with companies like Klarna, Discord, and Databricks coming to the market in the second half of 2024.

Strong performance of SPACs

Over the last two years, Special Purpose Acquisition Companies (SPACs) have proven popular and positive for many investors. While most experts agree to exercise caution with SPACs, they certainly favor short-term speculative trades. For a fast entrance into the market and a wider spectrum of companies that can go public, SPACs are still exciting; for example, Primoris has an 1126% return rate, and Vertiv has a 77% return rate.

SPACs continue to be a popular vehicle for companies going public. The flexibility and speed of SPAC mergers offer an attractive alternative to traditional IPOs, especially for high-growth startups looking to scale quickly.

Cross-border listings

Cross-border IPOs are gaining traction, with companies seeking listings in foreign markets to tap into diverse investor bases and achieve higher valuations. In fact, in Q1 of 2024, the two largest American IPOs, Lineage Inc. and Tempus AI Inc., were cross-border. In 2023, there were 85 cross-border public offerings. With the highest number (30) coming from China. This trend underscores the globalization of capital markets and the strategic decisions companies make to optimize their IPO outcomes.

Factors influencing current IPO trends

Economic conditions

A slowdown in global inflation meant that in 2024, global economic growth held steady at 2.6 percent. The overall health of the global economy plays a pivotal role in the IPO market. Economic growth, consumer spending, and business investment levels directly impact company earnings and investor confidence, influencing IPO activities. With a stabilization in global economics, this is likely to give investors the confidence to invest in IPOs in the H2 of 2024.

Interest rates

Interest rates set by central banks significantly affect the IPO market. Interest rates have slowly been increasing over the last few years due to the lasting impact of COVID-19, global inflation, wars around the world, changing governments, and more. This has dampened IPO activity as higher interest rates mean borrowing costs rise, so investors look for safer, yield-generating investments.

Market volatility

High market volatility can deter companies from preparing for an IPO due to the uncertain return on investment they present to potential investors. Companies prefer to launch IPOs in stable market conditions where predictions about future performance are more reliable. Conversely, periods of low volatility and rising stock markets typically see an increase in IPO activity.

Regulatory changes

The regulatory environment can either facilitate or hinder IPO processes. Stringent regulations and compliance requirements can increase the cost and complexity of going public, potentially discouraging some companies. On the other hand, regulatory easing and incentives for public listings can boost IPO numbers. Changes in securities law, corporate governance standards, and listing requirements are all regulatory factors that need to be considered.

Global political climate

Political stability and policies that encourage business growth and foreign investment can positively influence IPO market trends. Conversely, political unrest or protectionist policies can have the opposite effect, causing uncertainty that may deter companies from going public.

Investor sentiment

The mood and behavior of investors, driven by various factors, including those listed above, play a critical role. Positive investor sentiment can drive high demand for new IPOs, while negative sentiment can lead to a tepid response, affecting the pricing and success of new listings.

Technological advancements

Technological advancements have significantly streamlined the IPO process. Innovations in financial technology, such as blockchain, have simplified and secured transactions, making IPOs more appealing and accessible to a broader range of companies and investors. Here are just some of the technological innovations that are changing the IPO process in significant ways:

• Algorithmic trading and AI: Technologies like AI and machine learning are used to assess market conditions, set optimal pricing, and automate the bookbuilding process. This reduces human error and speeds up decision-making. In the US alone, it's estimated that 70% of trades are executed by algorithmic trading.
• Electronic bookbuilding platforms: These platforms facilitate the collection and analysis of investor demand, allowing underwriters to set prices more accurately and efficiently.
• Electronic submission systems: Regulatory bodies like the SEC have developed electronic filing systems (e.g., EDGAR) that allow companies to submit required documents digitally, speeding up paperwork and processing times.
• E-Prospectus and digital roadshows: Companies can distribute electronic versions of the prospectus and conduct virtual roadshows, reaching a wider audience without the need for physical travel.
• AI-driven platforms: These platforms use AI to match companies with potential investors based on investment profiles and preferences. This not only improves the efficiency of capital raising for companies but also helps investors find new opportunities quickly and easily.
• Tokenized securities: Blockchain can be used to tokenize shares, providing a more efficient and transparent way to manage ownership and transfer of shares.
• Smart contracts: These can automate compliance with regulatory requirements and streamline the execution of transactions, reducing administrative overhead.
• Crowdfunding and online brokerage platforms: These platforms provide easier access for retail investors to participate in IPOs, democratizing investment opportunities.
• Big data analytics: Companies and underwriters use big data analytics to gain insights into market trends and investor behavior, aiding in better decision-making throughout the IPO process. Many of these systems can connect thousands of data sources and pull all the data you need to make an informed decision together in seconds.
• Investor relationship management (IRM) tools: These tools, like our board management tool, help manage secure communications and relationships with potential investors, providing data-driven insights into investor interests and behaviors.
• Advanced encryption and security protocols: Ensuring the security and confidentiality of sensitive information during the IPO process is critical. Advances in cybersecurity and risk management technology help protect against data breaches and cyber threats.
• Compliance automation: RegTech solutions automate compliance checks and ensure adherence to regulatory requirements, reducing the risk of non-compliance and associated penalties.
• Real-time reporting: Real-time monitoring and reporting tools help companies stay compliant with regulatory requirements more efficiently.
• Video conferencing and virtual data rooms: These tools facilitate better secure communication and collaboration among stakeholders, including legal teams, underwriters, and company executives, improving coordination and reducing delays.
• Predictive analytics: AI and machine learning models predict market conditions and investor behavior, helping to optimize the timing and pricing of the IPO.
• Natural language processing (NLP): NLP tools can analyze large volumes of text data from regulatory filings, news, and social media to gauge market sentiment and identify potential risks.

Advanced tools like Diligent Boards, part of the Diligent One platform, combine all of this technology into one easy-to-use, easy-to-manage and collaborative platform. Directors and executives use Diligent Boards to make evaluations, questionnaires and other critical tasks easier. This helps them successfully prepare for a strong IPO.

Global IPO trends

In the first half of 2024, the volume of global IPOs fell by 12%, with 551 listings raising $52.2b in capital. This drop is mainly due to a slowdown in Asia-Pacific IPO activity as the Americas, Europe, the Middle East, Africa and India saw robust growth, with Europe stealing the show with 46% of the total number of global IPOs.

North America

US and Canada remain core to the IPO landscape. In the US, 80 new IPOs rolled out in H1 of 2024, with proceeds rising by 25% year-over-year. The industrial sector continues to lead, with significant contributions from tech companies being responsible for the majority of the IPOs in North America in 2024.

Europe

The IPO market 2024 in Europe is booming and shows no signs of slowing down. With a total market share of 45% of global IPOs, Europe has achieved its highest global market share since the 2008 Global Financial Crisis. This is thanks, in large part, to major European listings, which show that larger companies perceive the current market conditions as an optimal IPO window.

Asia-Pacific

Once seen as a hotbed for IPOs, this region has been experiencing geopolitical tensions, elections, economic slowdowns, heightened interest rates and a market liquidity drought. All of these factors have led to caution amongst investors. As a result, the region experienced a staggering slowdown and decline of 43%, with just 216 IPOs listed.

7 tips for navigating current IPO trends

1. Stay up to date on IPO trends: Regularly monitor market conditions and regulatory changes to ensure compliance and strategic alignment.
2. Stay ahead of compliance: GCs should stay updated on the latest IPO trends and legal implications to ensure the company meets all regulatory requirements and aligns strategically with legal frameworks.
3. Analyze market sentiment: CoSecs can monitor market conditions and advise on the optimal timing for the IPO, assessing investor sentiment and market readiness.
4. Leverage technology: Utilize advanced tools like Diligent Boards to manage IPO processes efficiently and securely.
5. Understand global differences: Be aware of regional variations in IPO trends and tailor strategies accordingly.
6. Engage with stakeholders: Maintain clear communication with all stakeholders to ensure a smooth and successful IPO process.
7. Prepare for volatility: Develop contingency plans to address potential market volatility and investor concerns.

Future outlook

Potential shifts in industries or sectors may lead or lag in IPO activities. For instance, advancements in green technology and biotech are likely to lead, while traditional sectors may see slower growth. Slower growth doesn’t always mean a fail, though, as we discuss in what happens when your IPO fails.

Upcoming economic forecasts suggest a mixed outlook, with potential continued growth in some markets and cautious optimism in other economies. These forecasts will influence IPO strategies, as companies seek to capitalize on favorable conditions.

IPO market trends currently suggest that the Asia market will continue to slow down, but the European market will continue to grow. However, with political changes potentially affecting the economy in both markets, the IPO trends in these regions are subject to change.

Smoothly navigate your IPO journey with our 7-step guide

Navigating IPO trends requires thorough preparation and strategic insight. To ensure your company's successful transition to the public market, download our comprehensive whitepaper, The Road to IPO Starts Now: 7 Steps for Going Public the Right Way. This guide provides invaluable tips and best practices to navigate current IPO trends and achieve your business goals.

The road to IPO starts now. Leverage our expertise and resources to make your public debut a success.