While the Presidential Inauguration is still months away and implementing policy change will take time, with the election behind us we now have clarity as to what direction the regulatory environment is headed. Not that the broad markets have exhibited signs of strain lately, resolution on the political front should bring about a clearer path forward for the IPO market. Closure and clarity from the election has the team at IPO Prophet excited for what lies ahead into the end of the year and to 2025. We expect to see some companies file in the weeks ahead and for momentum to accelerate into the new year.
With the market at record highs, valuations for publicly traded companies are high, which supports the IPO landscape as comparable valuations are supportive to new issuance. While 2021 legacy valuations continue to challenge some private investors and may be a sticking point for certain companies, conditions are now more favorable to move beyond that era of overly optimistic investment. Not all of this overhang needs to be absorbed by the IPO market alone. An improved M&A landscape should ease some pressure by absorbing some companies with challenging valuations, while also returning capital to early investors for redeployment into new opportunities. As a result of the election’s outcome, we expect a more relaxed regulatory environment at the FTC and DOJ to open the door for more deals to get done.
Within IPO Prophet’s 2024 tracked universe of trades where our models generated Bull Signals, these IPOs have returned a median of 40% from their opening trades. While the market’s record highs have provided favorable conditions, these companies have also demonstrated strong execution. Recent positive quarterly earnings from Astera Labs, Reddit, and Tempus AI have driven significant increases in their stock prices, as shown in our performance chart. As we’ve highlighted in previous posts, early in an IPO cycle, companies with solid fundamentals and confidence in their performance tend to lead the way into public markets.
As we move through the final months of 2024 and into a promising 2025, the Prophet’s conviction that a dynamic IPO cycle just beginning. With favorable market conditions, easing regulatory pressures, and strong fundamentals driving recent IPOs, we anticipate that the floodgates will soon open.
