Arm’s flotation could revive the market for IPOs
No matter how wild the party, it is a rare hangover that lingers into its second year. Yet after a record-smashing rave in 2021, investors in initial public offerings (ipos) are still nursing sore heads. Over the course of a year-long binge, they ploughed some $600bn into stockmarket listings around the world in 2021, according to Dealogic, a data firm. That is more than double the figure for 2007, in the mad gallop preceding the financial crisis, and nearly triple that for 2000, as the dotcom bubble swelled. But then soaring inflation, the end of cheap money and cratering markets put paid to the celebrations. In some places flotations all but disappeared: proceeds from American ipos in 2022 fell by more than 90% compared with the previous year. So far in 2023, the sombre mood has continued (see chart).
The music may soon start up again. On August 21st Arm, a British chip designer, at last filed a preliminary prospectus for a hotly awaited listing on the Nasdaq exchange, expected to take place in the first half of September. A likely valuation of between $60bn and $70bn would mark the biggest American float in nearly two years.
There is now a growing sense, both in markets and among economists, that the Fed’s rate rises are at or near an end. Yet uncertainty over how long rates will stay high persists, largely due to the surprising resilience of America’s economy. Mostly as a result of this, the yield on ten-year Treasuries—possibly the most important benchmark for investors—has risen by 0.8 percentage points since early May, to 4.2%. Until this measure begins to settle, ipos will remain hard to price and, as a result, sparse.
2023-08-24 05:30:32
Original from www.economist.com