IPO Insights Q4 2023
Perspectives on 2023 IPO market trends
Taking a company public can boost its profile and provide much needed capital resources. But ensuring readiness for the capital markets requires a keen understanding of the current IPO market—significant exits; sectors on the rise; trends in deal prices, sizes, returns; and more.
IPO Insights delivers the latest information and analysis on quarterly IPO activity and performance. Prepared by professionals from the KPMG Capital Markets Readiness and KPMG Private Enterprise practices, this quarterly report is designed to help private market business leaders prepare their companies to tap into the capital markets.
The year that was: A foundation for revival
It would be tempting to write 2023 off as a loss for IPO markets—to turn the page and move on to 2024. But the reality is much more nuanced.
Yes—activity was muted in 2023. Between geopolitical crises, significant economic headwinds, and interest rate uncertainty, just 107 IPOs came to market, raising a total of $19 billion. Median deal size dropped to $15 million (down from $20 million last year). Returns were disappointing, with the class of 2023 averaging a 19 percent loss on the year.
Yet, there were clear signs of recovery and rebirth. Versus 2022, deal count was up 49 percent and proceeds were up 150 percent. Thirty IPOs raised more than $100 million (up from 16 in 2022) and they averaged a 19 percent return at year-end.
Highlights of 2023
- 107 IPOs raised a total of $19.4 billion, with volume up 49% and proceeds up 150% compared to 2022
- Three companies – Arm Holdings, Kenvue and Birkenstock raised more than 50% of the year’s proceeds.
- PE successfully returned to the market after a year on the sidelines.
US IPO Activity
The dual levers of geopolitical and economic uncertainty wedged the IPO window shut for 2023. The economic side seems to be improving. But with more than half the world’s population going into elections this year, investors remain concerned about geopolitical risks.
Conor Moore
Global Head, KPMG Private Enterprise
The winners and losers: A handful of standouts
There were certainly some big deals in 2023. The 10 largest IPOs raised a combined $13.8 billion—71 percent of total proceeds for the year. The biggest was Arm Holdings—an established tech company—which raised nearly $5 billion and ended the year up 39 percent. Kenvue (a consumer health company spun out by J&J) and Birkenstock Holdings (the maker of the iconic sandals) also raised more than $1 billion, but both delivered mixed returns.
Financial services delivered the best returns overall. But the success of the sector rested on the performance of one large issuance, Skyward Specialty Insurance, which enjoyed a 122 percent return over the year. Healthcare was in a similar scenario with Structure Therapeutics (another $100 million plus issue) carrying the field with their 294 percent return on the year.
The technology sector underperformed. While Arm Holdings did well, other big-name issues sagged. Unicorns Instacart (an online grocery delivery platform) and Klaviyo (a marketing SaaS company) both enjoyed modest first-day pops, but ended the year down 18 percent and 5 percent, respectively. Overall, just six of the 22 tech IPOs in 2023 ended the year in positive territory.
There was hope that the three big tech IPOs of the year would push the IPO window open in the second half of 2023. And while continued economic and geopolitical uncertainty kept it shut, the year did provide some signs to support a slow yet strong recovery into 2024.
Shari Mager
Partner and U.S. National Leader, Capital Markets Readiness, KPMG LLP
US IPO Returns - Average 2023 Returns by Sector
Source: Renaissance Capital. Based on offer price to 12/15/23 closing price. Excludes direct listings.
- (X) represents the number of IPOs by sector in 2023.
- Comm. Services defined as companies that fall within the media, retailing, and software and services industries.
- Consumer Disc. defined as companies that manufacture products and provide services that consumers purchase on a discretionary basis.
PE and VC action: Moving toward the exits
Venture capital brought 20 deals to market, a 43 percent increase over 2022. Proceeds more than doubled on the back of the two tech unicorns, Instacart and Klaviyo. Biotechs accounted for the majority of VC’s offerings in the year. Yet while VC’s issuances performed better than the average, they delivered a meager -13 percent return from offer overall.
After more than a year on the sidelines, PE returned to the markets with 13 deals that raised a combined $4.7 billion. They brought a number of leveraged buyouts to market including Birkenstock, thrift store chain Savers Value Village, and energy service provider Kodiak Gas Services. Successes also included CAVA Group (a fast-casual restaurant chain), which rose 82 percent on the year, and ODDITY Tech, which rose 14.7 percent. Ultimately, PE’s issuances delivered an average return of 21 percent.
US IPO Activity – Venture Capital
US IPO Activity – Private Equity
Future trends
1
Closing the valuation gap
Valuations have fallen significantly from their highs of 2021. Back then, VC Tech IPOs were enjoying 22x multiples on average; this year, that number has fallen to 8.4x (albeit based on a small sample size of four issuances).
There is still a gap between public and private company valuations—although that gap narrowed as a result of the 2023 IPOs—and that is weighing on investor appetite for new offers. The gap is expected to narrow further in 2024 as founders and investors reset their expectations.
2
A hard landing for SPACs
It looks like a hard landing for SPACs. In 2023, just 30 new SPACs were formed, and more than 200 shut down. Average deal sizes shrunk to their lowest level in 11 years. Redemptions frequently topped 90 percent. Many SPAC managers chose to amend their corporate charters rather than liquidate.
De-SPACs also fell to earth with a thump. In 2023, 87 companies conducted a SPAC merger. By year-end, they had delivered a -61 percent return to shareholders. And the clock is running down for many SPACs. More liquidations are expected in 2024.
3
Waiting for the window to open
Proceeds from your last raise are running out, and you need to extend the runway if you want to remain on track to conduct an IPO once the window reopens.
Before you put your hand out for more money, make sure you have done everything possible to right-size the business. Founders are being told to sweat their assets and stretch their budgets, reduce headcount without impacting revenues, and prioritize near-term opportunities over long-term future growth.
4
Outlook for 2024
In many ways, the outlook for 2024 depends on the outcome of various geopolitical and economic challenges currently weighing on investors’ minds. A rate drop by the Fed in March accompanied by a cessation of hostilities in the Middle East could be enough to encourage a slew of IPOs in the second half of the year—although the various elections may temper that. Yet there are also dozens of potential risks on the horizon that could send markets in the other direction.
The key will be in remaining diligent, flexible, and ready so that when the markets do reopen, you are ready to take advantage.
Source (for all market commentary and data cited on this page): Renaissance Capital US IPO Market 2023 Review
How KPMG can help
Understanding the key trends and investor expectations is critical to preparing for an IPO. Investment narratives matter. They cut through the deluge of data and analysis, and help companies sift real windows of opportunity from market noise. And the most compelling deal stories come from insights about a company’s unique mix of valuation drivers. Sector. Markets. Customers. Portfolio mix. Capital structure.
At KPMG, our professionals offer a range of services specifically designed to help privately owned companies—venture-backed or otherwise—navigate each stage of the IPO journey. We help entrepreneurial ventures simplify the complex challenges of going public, while helping ensure they meet their diverse regulatory, compliance, and reporting requirements.
Working with KPMG, you gain access to trusted advisers who share your entrepreneurial mindset. And we can help you understand and improve the factors that drive maximum deal value for your offering.
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