US IPO Weekly Winners & Losers

The US IPO market had its worst week since 2022 and plummeted -8.3%, well below the S&P 500 (-2.1%), but slightly better than the ARK Innovation ETF (-10.0%).

The week's winner was insurance broker Ryan Specialty which gained +13.1%, while assisted-driving chip maker Mobileye was again the bottom performer, off -24.8%.

Jobs numbers severely disappointed, and the unemployment rate shot up to 4.3%. Confidence that the Fed had engineered a "soft landing" was replaced by fears of a recession. The VIX Volatility Index hit its highest level in over a year. Quarterly tech earnings are showing the cost of AI development, but not yet the payoff. Chip stocks were hit especially hard, since those valuations only make sense if demand stays high for years.

That's a lot of bad news, but long-time readers know that we're not alarmists. Corrections are a normal part of investing, and less common than rallies. We know from experience that sentiment can reverse in a hurry.

What does it all mean for IPOs?

While a week like this would normally shut down the IPO market, it's already closed for the annual August pause. It's not a good sign for September deal flow, but a lot can happen in four weeks, and the Fed now has a good reason to cut rates multiple times. We'll watch several early indicators such as the performance of the IPO Index, the VIX, and the pace of filings later in the month.

For the deals that do launch in the fall, IPO investors will focus more than ever on a combination of growth, profitability, and a compelling valuation. The strongest companies tend to go public in challenging markets, which can lead to buying opportunities.

Just one micro-cap IPO'd this week, cancer biotech OS Therapies (NYSE: OSTX), which raised $6 million. Two SPACs listed, including the year's largest (AAMU). Bill Ackman’s new closed-end fund Pershing Square USA pulled its IPO, a stunning setback considering news that it originally targeted $25 billion. In the prior week, the company filed a remarkable FWP that included both a letter from Ackman, and a disclaimer to ignore Ackman’s letter, where he argued that unlike other funds this one should trade at a premium to NAV, if investors were willing to take that leap of faith. They weren't.