The possibility of The Great IPO Reopening may be slipping further from reach as higher rates and declining stock prices make IPOs increasingly difficult. Recent IPOs have seen a tepid reception, particularly Instacart which opened at $30 but ended the day at $30.65, while Arm Holdings broke below its initial price of $51, closing at $52. Klaviyo hit $31.30 on its opening day, only slightly above the $30 initial offering price, closing at nearly $34. Despite early enthusiasm for the June IPO of restaurant chain Cava, having started at $22 and quickly reaching $55, it is now back to $30, still above the initial offering price. Kenvue, a Johnson & Johnson spinoff, went public in May with an offering of $22 and hit the high $20s for some time but is now below its original price. Cosmetics firm Oddity Tech priced at $35 in July and opened at $49, only to plunge to $28, lower than its initial price of $32. Due to the season's downward pattern and macroeconomic problems, including high interest rates, executives hoping to go public in October or November are deeply concerned. Negatively impacting the market are companies needing to raise capital, the majority of which are not profitable and unwilling to take the massive cuts needed for successful public offerings. Furthermore, the current market conditions make it difficult to find early companies with high probability of success, leaving only three options: additional private capital raising, a merger/buyout, or a move into the public markets. However, with the 10-year yield up nearly 40 basis points and the S&P 500 down 2.7% in September, the outlook for a successful IPO is grim with a further rise in rates and a 5% drop in the S&P 500 likely to force many IPO hopefuls to postpone their decision.
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