Tariff announcements sent markets into a tailspin last week. Global benchmarks plummeted while the VIX Volatility Index climbed above 50, its highest level since 2020. Now, IPO candidates are putting their plans on ice.
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A slew of prospective issuers have pushed back their IPO timelines following the global market sell-off, citing volatility. Recent filers Klarna (KLAR), StubHub (STUB), eToro (ETOR), and MNTN (MNTN) have all hit pause on their listings. In the shadow backlog, fintech Chime and medical supply firm Medline Industries are among the names that have announced delays.
High volatility weighs on new issuance; not only are investors more cautious with new issues while managing their existing portfolios amid a sell-off, it is difficult to price an offering at a predictable valuation when peer groups are trading erratically. Historically, IPO volume has dropped alongside spikes in volatility, sometimes for months, depending on the severity of the panic.
For now, it looks like the anticipated 2Q IPO pickup is on hold.
We could still see some listings from "2022-era" plays: Some common themes in the post-COVID bubble shutdown included mature business models, large carve-outs and cross-listings, small floats, and companies with positive cash flow. Biotech, insurance, consumer, and industrial were all solid sources of activity. As in any challenging market, investors will look for best-in-class companies with a combination of growth and profitability at a reasonable valuation, though this time around investors will also scrutinize companies' exposure to tariffs.
There were some notable tech deals during the past years' IPO drought (e.g. ARM, CART, RDDT, RBRK, TTAN), and recent filing activity had suggested a tech revival in the 2Q, but these filers will likely continue to delay until sentiment improves, or at least stabilizes. And when the VIX does settle down, we believe the IPO pipeline will be massive, due to the recent IPO bottleneck.
