Attendees of this week’s 11th Annual IPO Summit: Embracing Optimism: Navigating the Market Return, heard some encouraging words about the state of the IPO market — and received a Master Class on how to prepare for a successful public offering.
Hosted at the New York Stock Exchange, the event featured leaders with deep expertise in the many aspects of taking a company public. Their overall tone was cautious optimism — an assessment that jibes with what I’ve been seeing in the market.
Keith Canton, Head of Americas Equity Capital Markets at JP Morgan, said that he viewed the IPO environment in terms of three, successive “waves.”
“2023 was very much Wave One: large companies, profitable businesses, very scaled, very durable. A lot of household names,” he said. “I think that's what you're going to see a lot of in Q124.”
It’s worth noting that there’s been a healthcare/biotech pop in Q1, with five pricing in the past week or so, including Alto Neuroscience, Fractyl Health, and BrightSpring Health Services.
Canton said that he believed Wave Two would “start to trickle in in Q2, and Q3,” highlighting “mid-cap companies that are much more growth oriented, that are either profitable or on the cusp of profitability.”
Wave Three will occur in Q4 and into 2025, he said, and will include the “wide reopening of companies that are growth oriented, maybe not yet at the cusp of being profitable, but you've got line of sight.”
Samantha Lau, Chief Investment Officer—Small and SMID Cap Growth Equities, AllianceBernstein, said she sees opportunities in all sectors, including tech, consumer, biotech, healthcare services, industrials, and financials.
Getting Ready
So, what should companies do to prepare for their big day?
According to Canton, investors are looking for businesses that have the potential to be big, profitable at scale, and successful for a long time.
That’s a tall order — but the first step is for pre-IPO companies to use the 12 to 18 months prior to an IPO wisely. I heard a lot of excellent ideas to help companies do just that. Here are several of the best:
- Be sure to implement an ERP system and a procurement function that will enable your business to function as a public company from day one.
- Build relationships with external partners who can provide help where you need it — for example, SOX support.
- Build relationships with key investors, and make sure you are able tell your company’s story to them in a compelling and consistent way.
- Practice acting like a public company before the IPO — for example, by holding mock earnings calls and getting in the cadence of quarterly reporting.
- Establish proper governance practices that reinforce your strategy. This will enable you to embed imperatives that are important to your company — such as a commitment to sustainability, diversity, privacy — into your prospectus. Then you can execute against these commitments even before you go public.
DFIN was proud to be one of the sponsors of this event. Our solutions, such as ActiveDisclosure and Venue Data Room, have helped many companies working towards a public offering as well as those that are already public. Businesses rely on ActiveDisclosure to build the financial reporting rigor necessary for increased quarterly disclosure requirements. Connecting to Excel source data, it automates the creation of privately held financial statements for shareholders and external stakeholders.
Venue Data Room allows for securely storing and sharing documents across teams, advisors, and other third parties. It demonstrates credibility, deal readiness, and security consciousness.
Look for our next blog, focusing on one of the conference’s excellent panels: AI for IPO Readiness and Scaling, featuring DFIN’s own Director of Strategy, Justin Nowicki.
