Eric J. Savitz
Close to 100 companies recently have filed confidentiality with the Securities and Exchange Commission for initial public offerings and plan to list on Nasdaq, according to Adena Friedman, Nasdaq’s CEO.
Friedman made that startling comment in a wide-ranging interview with Barron’s at the CES tech trade show in Las Vegas. If she’s right, it would suggest a major rebound for the IPO market is in the offing.
The last two years were the slowest period for new issues in more than 40 years. Jay Ritter, a professor at the University of Florida, counts just nine tech IPOs in 2023, and six in 2022, down from 121 such deals in 2021. A flurry of tech IPOs in September — Arm Holdings, Klaviyo, and Maplebear (which does business as Instacart) — failed to revive the IPO market from its slumber.
While Friedman cautions that we continue to live in a complicated world, and that “there can be shocks to the system,” she thinks a stabilizing economic picture should help rouse the new-issue market out of its recent doldrums. “The economy remains relatively resilient,” she says. “There’s falling inflation, and a potential for lower interest rates. And the 2023 IPOs in aggregate have performed pretty well.”
Friedman says she expected to see at least a few companies attempt public offerings in the first quarter, in both healthcare and technology, with others focused on a second-quarter debut.
Likewise, Friedman expects to see a pick up in merger-and-acquisition activity in 2024 as interest rates decline, reducing the cost of capital.
From a higher-level perspective, she thinks healthy markets for both IPOs and M&A are crucial to encourage venture capital investment and company-creation. And she seems to think regulators shouldn’t routinely stand in the way.
“It is critically important to have multiple ways for innovators and entrepreneurs to monetize their investments,” Friedman says. That includes a path to an IPO, but also the possibility of getting acquired by a larger entity. “They need to have options to monetize over time,” she says. “That optionality gives venture investors the confidence to make their high risk decisions.”
Friedman adds that the U.S. markets “are the envy of the world,” in part because of the “vibrancy of the capital markets,” and the ability of technology companies to innovate both organically and inorganically.”
Meanwhile, Friedman said she was pleased with the recent SEC decision that will allow the list of Bitcoin-based exchange-traded funds. She views ETFs as giving consumers a safer way to invest in cryptocurrency than buying Bitcoin directly.
Write to Eric J. Savitz at eric.savitz@barrons.com