In the third quarter of 2023, the IPO market witnessed considerable activity, with a total of 26 initial public offerings (IPOs) jointly raising a solid $7.7 billion. The interesting fact here is that this amount matches the total proceeds raised in the whole of 2022. This occurred despite no significant increase in the number of deals compared to previous quarters.
Arm IPO Takes Charge
The chip giant Arm took the baton in the IPO activity by raising a substantial $4.9 billion. This marked the largest tech IPO since 2019 and made up for a huge 63% of the total proceeds for the quarter. The U.K.-based company hit the market in mid-September (read: Can Blockbuster Arm IPO Boost Semiconductor ETFs?).
Other Entries That Rocked: Instacart and Klaviyo
Grocery delivery platform Instacart and marketing software firm Klaviyo were close contestants, garnering attention as the first U.S.-based tech unicorns to go public in nearly two years. Both saw success.
Grocery delivery company Instacart’s shares (CART) made their Nasdaq debut on Sep 19, with a 12% increase in their stock price, though the stock made an intraday high gain of 43%. Klaviyo’s shares surged about 23% on market debut, gifting the marketing automation firm a valuation of $11.3 billion.
Diverse Sector Participation
Apart from the tech sector, the healthcare and consumer sectors also made significant contributions. However, only seven IPOs managed to raise $100 million or more during this period, per Renaissance Capital. Despite the overall strong IPO activity, small issuers kept the hold of the market. This had the effect of keeping the median deal size at a record-low $13 million, impacting overall performance.
A total of 24 companies went public via SPAC, including the notable electric vehicle manufacturer VinFast Auto (read: Should You Buy the Slump in VinFast? ETFs in Focus).
How Was The IPO Performance?
The IPOs in Q3, on average, recorded a weak return of negative 32% from their offer prices. Larger IPOs with over $100 million in proceeds performed somewhat better, with average trading down by 2%. This performance was marked by solid first-day gains followed by unfortunate aftermarket returns.During Q3, Renaissance IPO ETF IPO was off 1.8% versus 2.5% losses seen in the S&P 500.
What Lies Ahead?
Sandal maker Birkenstock is scheduled for listing in the fourth quarter. Despite the relatively quiet filing activity and some market volatility toward the end of the third quarter, there is still optimism about the revival of IPOs through the rest of 2023 and into 2024. Market participants are still encouraged by the return of large tech IPOs. Notably, First Trust US Equity Opportunities ETF FPX lost 3.2% in the third quarter.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.