Public Embarrassment

What’s going on?

Data out over the weekend showed that companies are hesitant about going public right now, with stock market conditions seriously touch-and-go.

What does this mean?

It’s no secret that companies prefer a stable, robust stock market when they’re floating their shares for the first time. After all, higher investor confidence typically leads to higher valuations, and it also makes it easier to sell shares at a premium. But lately stability has been in pretty short supply, what with the widespread recession fears and ongoing turmoil in the banking sector – and one tell-tale volatility measure has been riding high for much of March. No wonder, then, that businesses are holding off on going public: according to data from Bloomberg, firms have raised a mere $19.7 billion from initial public offerings (IPOs) so far this year – a four-year low-water mark and a 70% dropoff from the same time last year.

Why should I care?

For markets: Second to none.

Despite the gloomy IPO landscape, secondary offerings – the sale of shares by companies that are already listed – appear to be a bright spot, raking in 48% more than the same time last year. That could be down to companies capitalizing on the early-year rally – plus, investors are more likely to place a bet on familiar, established firms anyway. But markets as a whole still have a long way to go, and some analysts think they’ll only regain their luster once folks have an idea where interest rates are headed.

Zooming out: Call to ARMs.

SoftBank will be watching markets very closely indeed and hoping for a turnaround. The tech investor’s planning to list chip-designing firm ARM on the stock market later this year, and it’s already making some canny preparations: last week the company announced that it’s upping the price of its chip designs, used in over 95% of smartphones – which should boost profit and tempt some hard-nosed investors when it does pull the trigger.

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Originally Posted March 27, 2023 – Public Embarrassment