SpaceX's fall from its post-listing peak to below its IPO price in just a month poured cold water on the market for newly public companies, dragging a key gauge of this year's debuts down with it.
The pullback across stocks linked to themes such as artificial intelligence infrastructure and aerospace and defense — two of the hottest sectors for newly-public companies — depressed the weighted average return for this year's US initial public offerings to 6%, lagging the S&P 500 Index's 11% return, data compiled by Bloomberg through July 15 show.
Broader market volatility, including share price declines for recent listings, is set to dampen enthusiasm for what a Blackstone Inc. executive dubbed the year of the IPO. The majority of US debuts over the past two months are trading below their offer price, data compiled by Bloomberg show.
ALSO READ: SpaceX Craters Below IPO Price For First Time; Shares Down 40% From Post-Listing Peak
SpaceX shares slumped 2.97% Thursday, on pace for an eighth drop in nine sessions, as it wiped out $903 billion from a closing high last month. Shares of SK Hynix Inc., which raised $26.5 billion in a record-setting debut of its own last week, dropped 12% bringing it just a few dollars above the $149 level where it sold American depositary receipts to investors.
Add image caption here
Activity in the near-term will “be less busy than we thought,” Michael Ventura, co-head of US equity capital markets at Royal Bank of Canada, said in an interview. “You will have transactions that launch and price but outside of the headline names it'll be quieter.”
Blockbuster Deals
Even without blockbuster deals like SpaceX and SK Hynix, the broader US IPO market hasn't shot out the lights. The weighted-average return for those 2026 US IPOs has pulled back to roughly 10% through July 15's close, modestly lagging the return for the S&P 500.
The underlying market volatility over the past month, despite an S&P 500 that is virtually unchanged, has prompted investors to rotate away from once-favored themes. While the benchmark is up roughly 0.3% over that stretch, the Philadelphia Stock Exchange Semiconductor Index has slumped 11% and a momentum basket of stocks down more than 8%.
“We had a ton of momentum with the AI theme that led to the deals trading well out of the gates but with markets trading how they are, the steam will come off of that a little bit, and that's to be expected,” said Eddie Molloy, co-head of global equity capital markets at Morgan Stanley.
Investors will likely get a taste of companies that sit away from AI with Blackstone-backed Jersey Mike's Subs Inc. and gas-station and convenience-store operator Cumberland Farms Ltd. able to launch formal marketing of their IPOs as soon as Monday. They would be the first consumer-oriented firms to go public with sizable deals since Suja Life Inc. debuted in May. The handful of notable consumer companies to IPO this year have lagged, ranging from Suja Life's 48% decline to Yesway Inc.'s 3.3% gain.
Still, it's too early to rule out a second-half surge led by Anthropic PBC, which could go public as soon as October, Bloomberg News reported.
Wall Street's biggest investment banks announced in the last few days that they hauled in the most revenue from advising on equity offerings in the second quarter since 2021, fueled by SpaceX's record-setting IPO and a fundraising blitz for AI infrastructure.
ALSO READ: SpaceX, Apple, PayPal, Micron Dominate Wall Street Action Amid Muted Moves In Dow, S&P 500
Companies have already raised $157 billion through July 16, excluding blank-check companies and other financial vehicles, data compiled by Bloomberg show. Bankers are optimistic that deals will flow after September's Labor Day holiday.
“Is there volatility in the broader market and that impacts the IPO market? Yes,” said Arnaud Blanchard, co-head of global ECM at Morgan Stanley. “But overall we're not seeing a decrease in appetite for deals which we expect to come to market over the coming quarters.”
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.