At Last, Long-Awaited Inflection Point for IPOs Seems to Be Here

After a lean season, a bevy of excitement-generating deals is in the pipeline, headed by Instacart.



Initial public offerings, ailing since the stock market’s breathtaking 2022 plunge, look to finally be getting their mojo back —with a much-anticipated list of companies waiting to go public. It’s a testament that last year’s volatility and risk-off mindset are gradually fading away.

Garnering the most buzz among recent IPO filings is that of Instacart, the largest online grocery delivery business by sales. The company is expected to go public next month. Other much-watched September launches are those of British chip designer Arm and e-commerce marketing platform Klaviyo. And 400 other private tech companies are eyeing public offerings, per EquityZen, an online marketplace for privately held stock.

None of this is to say that a return to a banner IPO year, on the order of 2021, is in the offing, an analysis by research firm Morningstar cautioned. There is a lack of the “frenzied demand” that existed two years ago, the analysts observed.

Investor sentiment has changed for the better, however. As the report noted, “Before the bear market, investors were much more willing to pile into money-losing companies in search of the next growth-stock winner. In the current environment, many investors are focusing on larger, more established cash-generating names.”

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That is why a number of companies are gearing up for an offering. “Because of the strength of the returns that we’ve seen this year, more and more deals are exploring going public, either in the fall or 2024,” said Matthew Kennedy, senior IPO strategist at Renaissance Capital, an investment bank specializing in initial offerings, in a Morningstar interview.

In 2021, U.S. IPOs raised $142 billion for 397 offerings, according to Renaissance. That count fell to $7.8 billion for 71 deals last year. While this year’s first quarter was disheartening (29 IPOs, raising $2.3 billion), the second period showed more promise: Although the deal count was slightly less, at 23, larger companies came public, so $6.6 billion was raised.

The largest of all was consumer health firm Kenvue, a May spinoff from Johnson & Johnson; it went public for $4.4 billion. Kenvue has since joined the S&P 500. After the IPO, the shares have dipped 15%, which suggests it may have been priced higher than warranted at the outset.

Another celebrated recent offering, that of Cava Group, which raised $318 million, gave an initially robust market performance since its June launch, with its price doubling. But then Cava fell back to its offering price.  In all, nine IPOs in the second quarter raised $100 million or more.

The post-offering market performance of these IPOs seems to demonstrate that the recovery in fledgling public companies is sober-minded. Nonetheless, more and more privately held companies are seeking public listings, and that should restore the IPO market to something of its former glory.

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Climate Risk Looms for Infrastructure Investments, Warns Report

Hazards are already apparent for many institutional investors in infra funds, says French business school EDHEC.



Climate risk in unlisted infrastructure investments is increasingly worrisome for institutional investors, particularly pension funds and insurance companies, according to French business school École des hautes études commerciales du Nord.

EDHEC sent an open letter to the European Insurance and Occupational Pensions Authority to alert it to the “materiality of physical climate risk in unlisted infrastructure investment,” which EDHEC warned is “not limited to a distant future.” The letter’s authors wrote that “in the event of runaway climate change,” some institutional investors could lose more than half of the value of their infrastructure portfolio before 2050.

The letter was signed by Frédéric Blanc-Brude, director of the EDHEC Infrastructure Institute, and Noël Amenc, an associate professor of finance. Many asset allocators invest in infrastructure as limited partners in funds that are not publicly traded.

“Many regulators and national authorities are currently encouraging pension funds to increase their investment in this attractive asset class,” the letter stated. “It should nonetheless be recognized that regarding climate risk, and notably physical climate risk, the data on the exposure and the financial materiality of this risk being realized for private assets is fairly limited.”

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To compensate for the limited data, EDHEC conducted an analysis of the risk for unlisted infrastructure investment and found that “if no serious measures are taken, financial losses from physical risk (which are never zero) would be twice as high than in a low carbon scenario, for all investors.”

EDHEC research showed that the cost of physical risks within the “current policies” scenario represents, on average, 4.4% of the total net asset value of the assets in its reference database until 2050, with the average maximum loss at 27%.

According to EDHEC, the importance of physical climate risk is often downplayed because risks are expected to have negative results mostly after 2050, beyond most investors’ time horizon. EDHEC also criticized a pervasive perception that only less advanced economies would suffer from the physical consequences of climate change due to a lack of economic resilience, including in terms of infrastructure.

“Holding this view would be misguided,” EDHEC warned in its report. “Many investors are now exposed to longer-term investments through 20-25-year and evergreen funds, as well as direct investments that are meant to be held to maturity.”

The report added that the same LPs currently invested in 10-year funds will become exposed to the same assets in the next generation of infrastructure funds, whether they are follow-on funds or under new management.

“This materiality in advanced economies, which are mostly in the northern hemisphere, challenges the intuition of many investors and economists that these economic risks impact first and foremost the poorer populations of the global south,” the report stated. “Instead, the reverse is true: more value will be destroyed in places where more valuable assets exist.”

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