Corporate finance experts say going public is cool this summer; that’s not the case for a billionaire hedge fund manager’s overhyped IPO.
Toward the end of July, several companies looking to go public told vastly different stories than the one billionaire Bill Ackman weaved on social media.
The hedge fund manager grabbed headlines on Wednesday, July 31, when he decided to no longer plan an initial public offering (IPO) for his firm, Pershing Square USA.
In a prepared statement on X.com, Ackman posted: “While we have received enormous investor interest in PSUS, one principal question has remained: Would investors be better served waiting to invest in the aftermarket than in the IPO? This question has inspired us to reevaluate PSUS’s structure to make the IPO investment decision a straightforward one. We will report back once we are ready to launch a revised transaction.”
The withdrawal comes shortly after the fund announced plans to raise $2 billion—significantly lower than the previously touted $25 billion.
When valuations shift so drastically, it’s usually due to “a major event” or “a failed deal, or even a market correction,” Carl Niedbala, co-founder of risk management firm Founder Shield, said.
“It’s tough to pinpoint the perfect valuation,” he added, skeptical that it was indicative of a trend.
Indeed, Ackman’s decision to scale back IPO plans seemed evident when reports suggested that Seth Klarman, a fellow billionaire investor, appeared to be committed to investing in Pershing Square USA but ultimately rescinded.
Calls to Pershing Square were not returned.
Meanwhile, other companies enjoyed better luck.
Lineage Inc., for example, raised over $5 billion and began trading 12% above its offer price as of July 30, making it the largest IPO of 2024.
In an email to Global Finance, EY’s Global IPO Leader George Chan noted that Lineage’s success underscored a “particularly active” July.
Chan also singles out the $564 million listing of KKR-backed OneStream Inc., which priced above its initial filing range and is currently trading 40% above its offer price.
Then there’s health services provider Concentra Group Holdings, which raised about $529 million.
“Valuations are more tempered compared to the highs of 2020 and 2021,” Chan says. “This indicates a balanced approach with sustainable pricing levels.”
Thus far, he adds, it’s been a good year for IPOs, even if activity didn’t surpass 2023.
According to EY, global IPO volume fell 12% for the first six months compared to last year. IPO proceeds were also down—by 16%—year over year.
The data appears to be far from the comeback dealmakers expected when they spoke to Global Finance late last year.
“The global IPO market experienced a mild downturn due to weak IPO activity in the Asia-Pacific (APAC) region, particularly in Greater China,” he says.
“Historically, APAC has significantly contributed to global IPO activity. Therefore, the decline in IPO numbers is more indicative of APAC’s underperformance rather than the below-average performance of other regions,” Chan adds.
However, he points to two other regions that witnessed a significant increase in IPO activity during the first half of 2024: the Americas and Europe, the Middle East, India and Africa (EMEIA).
EMEIA saw a 45% increase in IPOs and an 84% rise in proceeds, while the Americas experienced a 14% increase in IPOs and a 75% increase in proceeds.
“In stark contrast, APAC witnessed a 42% decline in the number of IPOs and a 73% drop in proceeds,” Chan says.
Ryan Coombs, a partner in O’Melveny’s Capital Markets Practice, agreed that July was “a positive start to the second half of the year.”
“I don’t think the global IPO statistics reflect the health of the US IPO market,” he adds. “Year-over-year, the trends suggest there will be more US IPOs in 2024 than in 2023.”
Coombs says the US election and interest rate changes may impact the second half of the year. But he expects the same energy in the US IPO market in the first half of 2024 to carry through to the second half of 2024.
“I think the US IPO pipeline will continue to reflect the market’s preference for businesses with quality financials and demonstrated growth opportunities,” he said.