This week will be the biggest for initial public offerings all year. Unfortunately, that may not be enough to shake the IPO market out of its funk. Financial services company OneStream priced its IPO at $20 late Tuesday, up from a rumored range of $17 to $19. Its shares opened at $26 on Wednesday. This is good news. The bad news: The company is priced at about $4.6 billion, but its last private financing round in 2021 valued it at $6 billion, so the company will go public at a discount of about 25% from its last private financing round. This is a familiar story by now. Many companies raised capital through private placements two to four years ago at very high valuations. Many of these companies are now trying to go public, but investors are hesitant about high valuations and required cuts. The year’s biggest IPO will price tonight Meanwhile, investors are awaiting pricing for the massive deal Wednesday night. The stock will begin trading on Nasdaq on Thursday under the symbol “LINE.” Lineage, the world’s largest temperature-controlled warehouse real estate investment trust, expects to offer 47 million shares at a price range of $70 to $82. The company stores fresh food and other perishable foods in its warehouses and hopes to raise $3.6 billion. It is far and away the largest initial public offering of the year, more than twice the size of cruise operator Viking Holdings, which went public in May. Another tough year No matter how you look at it, 2024 will be the third consecutive year of underperformance for the IPO market. Only $17.8 billion has been raised so far this year, according to Renaissance Capital. The average full-year value a decade ago was about $50 billion. IPOs: Total money raised 2024 to date: $17.8 billion 2023: $19.4 billion 2022: $7.7 billion 2021: $142 billion (record) 2020: $78 billion 2019: $46 billion 2018: 470 $ Billion Source: Renaissance Capital It’s a valuation issue The problem isn’t that the market, despite its recent decline, remains within striking distance of all-time highs. Interest rates are also more stable. The problem is valuation. “Public investors are not willing to pay 2021 valuations,” said Renaissance Capital’s Matt Kennedy. “Every company that has raised capital[in the past few years]realizes this. The question is, how much demand will there be for these deals in the public market?” ?The answer is, there’s some demand. Companies that want to take a cut may be disappointed in their last round of financing, but it depends. Many companies are considering going public at lower valuations. pressure and might say, “We have enough cash and enough funding, let’s wait until 2025.” Others may be willing to accept a lower valuation, or may not have that option because they need additional cash because private funding is no longer available. On the bright side, this has been a discouraging trend over the past few years. IPOs will go up for one day and then go down over the next few weeks and months, and the poor investors who bought on the first day end up losing money, maybe letting the company go public at a lower price than the last private round. That’s a good thing for buyers of public offerings, as perhaps more companies will see their stock prices hold up after their debuts.
