Between StubHub and Klarna, bankers say roaring IPO demand feels like 2021 again

As the IPO landscape heats up this fall, investor enthusiasm is reminiscent of the frenzied activity seen in 2021. Bankers report that demand for new listings is at a level not witnessed in years, with order books swelling as companies prepare to enter the public market. Recently, the IPO scene experienced its busiest week since 2021, highlighted by ticketing platform StubHub finally moving forward with its long-awaited IPO, scheduled to begin trading on Wednesday. Sumit Mukherjee, the head of market intelligence for equity capital markets at JP Morgan, remarked on the unprecedented level of participation from various global investors, indicating that current interest even surpasses that of the 2021 IPO boom. Among the notable listings from last week was Klarna, the prominent 'buy now, pay later' service, which successfully raised $1.37 billion after postponing its IPO earlier this year. Following closely, blockchain lender Figure went public, raising nearly $800 million and seeing its shares soar over 60% above their initial price on the first day of trading. Mukherjee forecasts at least 15 IPOs for this month alone, with a potential 20 to 25 additional listings expected between October and December, reflecting a robust appetite from investors. However, he warned that the number of eager buyers for these new listings may outpace the availability of leading companies ready to go public. The IPO market's momentum has caught the attention of policymakers as well. Recently, President Donald Trump suggested that companies should only need to report earnings biannually instead of quarterly, a change that could ease financial burdens and allow managers to focus more on operations. After three years of stagnation, the renewed interest in IPOs has led to significant price surges for companies once they hit the market. For instance, design software company Figma saw its stock price jump over 300% shortly after its IPO in July, while crypto company Circle soared more than 800% in June. Despite these successes, the current wave of IPOs is not escaping the trend of pricing below peak private valuations. Many believe this pricing strategy, which incentivizes investment by offering shares at a discount, is contributing to the heightened demand for new IPOs. However, companies entering the public market this fall are experiencing less dramatic price increases compared to earlier listings. For example, the crypto exchange Gemini Space Station saw a modest rise of over 60% on its debut, significantly less than Figma’s initial performance. The cooling of IPO pops can be attributed to more companies entering the market, allowing banks to set more competitive pricing based on sector comparisons. As the landscape evolves, Mukherjee anticipates a broader array of sectors participating in the IPO frenzy next year, with companies like Black Rock Coffee Bar paving the way for consumer goods firms. While expectations are high for upcoming listings, many high-profile startups, including OpenAI and SpaceX, may opt to remain private longer due to their access to substantial private funding and the desire to avoid the pressures of public market disclosures. Despite the excitement surrounding recent IPOs, experts agree that a consistent influx of companies successfully entering the public market is essential for bolstering confidence across the startup ecosystem. The continued interest from investors will ultimately determine whether the IPO window remains open across various sectors.