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Keeping the Pulse on the IPO Market

Phil Mackintosh
Phil Mackintosh Nasdaq Chief Economist

We recently launched our IPO Pulse Index, designed to show the trend in initial public offerings (IPOs) before the actual IPO data changes. 

Today, we look at how the data tracked through Q1 of 2024. 

Nasdaq’s IPO Pulse Index is still rising 

The Nasdaq IPO Pulse Index continued to rise over the last few months, reaching a 2½-year high in its March reading. 

The strong start to the year for equities has helped. The S&P 500 rose 10% in Q1, making it the best Q1 since 2019. Not only did that boost the S&P 500 annual price growth component, but also investor sentiment and valuations. 

But it wasn’t just the market rally driving the results. This upturn in the IPO Pulse remains broad-based, with five out of six components contributing. In fact, the only component that didn’t help boost the IPO Pulse was the year-over-year change in the VIX. This makes sense, though, since volatility is already so low that it’s difficult to fall much further (why volatility is so low is a source of debate). 

This all suggests that the IPO environment is positive, and IPO activity should remain in an uptrend in the coming months. 

Chart 1: The IPO Pulse (advanced five months) is forecasting a recovery in the IPO market in 2024  

The IPO Pulse (advanced five months) is forecasting a recovery in the IPO market in 2024

Q1 saw more and bigger IPOs than in recent quarters 

The IPO market also opened up a bit in Q1, with almost 40 IPOs, the most (non-SPAC) IPOs in more than two years. It also saw nine “unicorn” IPOs (companies with day one market caps of at least $1 billion), compared to just four in Q4 and six in Q3. So, we’re seeing more and bigger IPOs. 

The IPOs were pretty evenly spread across sectors. Health Care led the way, with about a third of IPOs (chart below), but Industrials, Consumer Discretionary, IT, Financials and Communication Services also saw significant shares of IPOs. 

Chart 2: Q1 IPOs came from several different sectors 

Q1 IPOs came from several different sectors

Additionally, we saw positive signs for investor demand. 

Eight companies priced their IPOs at or above the top end of their range in Q1, compared to just one in Q4. For instance, Astera Labs — one of the companies that priced above its range — jumped 72% in its debut and is now about double its IPO price. 

We should also note that our IPO Pulse excludes SPACs, which means the multi-billion-dollar DJT SPAC conversion has not been added to our IPO Pulse Index. 

Election years bring IPO timing forward 

With 2024 being an election year, some might wonder if that has any effect on IPO activity. 

The data shows the full-year IPO activity is virtually the same in election years (chart below, blue bars) and non-election years (orange bars). However, we see a “pull forward” of IPO activity right before the election — with August, September, and October all around 30% above the non-election year pace, offset by a typically quieter November in election years. 

Chart 3: IPO activity gets pulled forward a few months in election years 

IPO activity gets pulled forward a few months in election years

Interestingly, we see a similar pattern for volatility. The months before the election typically have elevated volatility, which subsides once the winner of the election is known. 

IPO upswing set to continue into H2 2024 

Not only is the IPO Pulse now at a 2½-year high, but the economy and earnings are also looking strong, while the Fed has signaled rate cuts are on the horizon. All of which also support valuations.  

Ultimately, this suggests that the IPO market should continue to improve over 2024. 

Michael Normyle, U.S. Economist at Nasdaq, contributed to this article. 

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