The Prophet's Perspective: Week of Oct. 28, 2024

Throughout 2024, we’ve concentrated on three key catalysts to revive the IPO market: rebuilding confidence for both issuers and investors, tackling structural imbalances from prolonged inactivity, and pushing past the uncertainties of an election year. Back in July, we noted that the IPO market was beginning a new cycle. Although activity remains below what would indicate a robust market, the groundwork for a strong 2025 is being laid.

After the severe slowdown of recent years, the IPO market has been caught in a “trust trap.” As demand weakened, issuers grew hesitant to take on the costs and risks of a public offering, creating a self-reinforcing cycle of caution. This standoff has transformed perception issues into tangible barriers, with both issuers and investors reluctant to engage. Breaking this cycle requires a consistent flow of diverse IPOs to gradually restore confidence—a central theme of 2024.

Last week’s IPOs showed encouraging signs. Ingram Micro’s debut demonstrated private equity’s pathway back to the public market; biotech continued to show interest with Septerna’s share issuance; and WeRide’s ADS listing illustrated growing international demand. Significantly, we’re seeing a trend of companies trading above their offer prices—an essential marker that the “trust trap” is loosening.

Historically, the IPO market slows during election years, whether or not the uncertainty around presidential elections is warranted.  As the election approaches, IPO activity is likely to remain subdued. A close or contentious result may bring temporary instability, but with the vote just around the corner, we’re nearing the end of this period of political uncertainty.  Once the election uncertainty fades, all three of our catalysts for 2024 will be realized. At IPO Prophet, we’re optimistic about the strong foundation being laid for a promising 2025.

The Prophet's Look In The Rearview Mirror

• Ingram Micro Holding Corp.(INGM: Bull Signal, 2 Bear Signals)
  Shares jumped 12% in their debut, following a $409 million IPO jointly offered by the tech company and backer Platinum Equity. Shares closed at $24.60, above the $22 offering price, giving Ingram Micro a market value of around $5.8 billion. The company will use proceeds to reduce debt, a strategy CEO Paul Bay emphasized as part of a broader financial plan. Founded in 1979, Ingram Micro provides technology services and runs its digital platform, Xvantage. Platinum Equity retains nearly 90% control after the IPO, following its 2020 acquisition of Ingram Micro for $7.2 billion.
  
  
• Septerna Inc. (SEPN: No Bull Signal, 2 Bear Signals)
  Shares rose 19% in its trading debut after raising $288 million through an enlarged IPO. Priced at $18, the South San Francisco-based biotech firm closed Friday at $21.40, giving it a market value of around $900 million. Septerna focuses on developing oral small molecule drugs targeting endocrinology, immunology, and metabolic diseases. This IPO success follows a recent surge in biotech listings, with drug developers raising $3.9 billion on U.S. exchanges this year, surpassing 2023’s $2.9 billion. Led by JPMorgan, TD Cowen, Cantor Fitzgerald, and Wells Fargo.
  
• WeRide Inc. (WRD: No Bull Signal, 1 Bear Signal)
  The Chinese autonomous driving company, saw its American depositary shares (ADS) rise 6.8% after raising $440.5 million through an IPO and private placement. The Guangzhou-based company’s ADS closed at $16.55 in New York, above the $15.50 IPO price, giving WeRide a market valuation of $4.5 billion. Bosch invested heavily, purchasing 83% of the offering, while other investors bought $320.5 million in private placements, including $97 million from Alliance Ventures. After delays, this IPO marks one of the largest U.S. debuts by a Chinese firm since 2021.

IPO Prophet’s value lies in our proprietary signaling process. We analyze Initial Public Offerings using a suite of algorithms refined over the past 20 years. The table above highlights all IPOs in 2024 where IPO Prophet has generated a Bull Signal, demonstrating returns based on our signals and subsequent performance since the opening trade. While our indicators can be applied to longer-term positions, the data above reflects only the first day’s performance, as our signals are designed specifically for issuance day, with positions marked to market at the close of the IPO’s first trading day. To learn more about our process, here.