Is the U.S. IPO Market Coming Back to Life?

Reddit raised roughly $520 million in its closely watched initial public offering on Wednesday. The social media company that hosts millions of online forums and makes money primarily through advertising, had priced its IPO at $34 - the top of the previously anticipated range - indicating healthy demand for what was arguably the most anticipated IPO of 2024 so far. The pricing gave Reddit a valuation of $6.4 billion, which is down more than 30 percent from its peak private valuation of more than $10 billion in 2021. Reddit's IPO is the second high-profile stock market debut this week, after Astera Labs, a company making connectivity hardware for cloud computing data centers, saw its share price pop 72 percent on its first trading day on the Nasdaq stock exchange on Wednesday. If Reddit's long-awaited debut yields similar results, it would be a clear sign of life from the U.S. IPO market, which had dried up completely in 2022 after a record-breaking 2021.

According to Dealogic data analysed by EY, IPO activity picked up slightly in 2023, with Instacart, Klaviyo and Birkenstock among the larger names making their stock market debut last year. As our chart shows, companies raised $22.6 billion in 128 initial public offerings in the U.S. last year, compared to $8.6 billion in just 90 IPOs in 2022. Going forward, EY expects IPO activity to pick up further, as many of the headwinds that caused the latest drought have begun to subside. With inflation gradually cooling, rate cuts on the horizon and the stock market at historic highs, the market backdrop looks more positive now that it did at any time in the past two years.