This week will mark the biggest week for initial public offerings all year. Unfortunately, it may not be enough to get the IPO market out of its funk. Financial services firm OneStream priced its IPO Tuesday night at $20, above the price talk of $17-$19. Its shares opened Wednesday at $26. That’s the good news. The bad news: the pricing valued the company at about $4.6 billion, but the last private funding round in 2021 valued the company at $6 billion, so the company is going public at a roughly 25% haircut to its last private funding round. This is now a familiar story. Many companies raised money two to four years ago in private funding rounds at very high valuations. Many of these companies are now trying to go public, and investors are balking at the high valuations and demanding haircuts. Biggest IPO of the year set to price tonight Meanwhile, investors are waiting for a massive deal to price Wednesday night. The stock will begin trading on Thursday under the symbol “LINE” on Nasdaq. Lineage, the largest temperature-controlled warehouse REIT in the world, expects to price 47 million shares at between $70 and $82. The company stores fresh food and other perishables in their warehouses, and hopes to raise $3.6 billion. This would be far and away the largest IPO of the year at more than twice the size of cruise operator Viking Holdings , which went public in May. Another tough year No matter how you slice it, 2024 is turning out to be the third consecutive year of subpar IPO markets. Only $17.8 billion has been raised so far this year, according to Renaissance Capital. The average going back a decade is about $50 billion for the full year. IPOs: Total raised 2024 YTD: $17.8 billion 2023: $19.4 billion 2022: $7.7 billion 2021: $142 billion (record) 2020: $78 billion 2019: $46 billion 2018: $47 billion Source: Renaissance Capital It’s a valuation problem The issue is not the markets, which despite the recent downdraft, are just short of record highs. Interest rates have also been more stable. The problem is valuations. “Public investors are not willing to pay 2021 valuations,” Matt Kennedy from Renaissance Capital said. “All of the companies that had funding rounds [in the last few years] are aware of this. The question is, how much demand is there in the public market for these deals? The answer is, there is some demand. Companies that want an up-round are going to be disappointed, but companies willing to take a haircut can get deals done.” The upshot: it depends. Many companies are looking at the pressure of a lower valuation to go public and are likely saying, “We have enough cash and enough funding, let’s wait until 2025.” Others may be willing to accept the lower valuations â or may not have the choice because they need the additional cash because private funding is no longer available. On the bright side It’s been a depressing trend over the last few years. IPOs see a one-day pop, and then trade down over the next few weeks and months. The poor investors who bought on the first day end up losing money. Maybe getting companies to go public at prices lower than their last private funding round will be good for buyers of IPOs, as maybe more companies will see their stock prices hold up after their debuts.
