The IPO market is drawing attention as fast-fashion retailer Shein files to list on the London Stock Exchange. Doug Adams, Citi global co-head of equity capital markets, joins Catalysts to provide insights into the IPO landscape's current state and future prospects.

Adams highlights a noticeable increase in IPO activity in domestic and global markets. He emphasizes the complex decision making process companies undergo when considering an IPO. The many factors at play include the company's clientele base, target investors, market presence, and timing.

Looking ahead, Adams projects a continued upward trend in IPO debuts, particularly in 2025 and 2026. However, he cautions about the immediate future: "When we think about the windows of going public between now and the end of the year, we've got a couple of windows, but there's a lot of uncertainty," citing global elections and market dynamics as key factors contributing to this uncertainty.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video Transcript

The fast fashion giant.

She and confidentially filed paperwork to list on the London Stock Exchange.

That's according to several reports.

And the retailer has strong ties to China Previously did try to confidentially file in the US but failed to win broader support in part due to its use of force.

Labour practises practises in its supply chain.

So what does this tell us about the state of play for IP OS and company listing decisions on as we bring in, Doug Adams, city co head of equity capital Markets.

Doug, thanks for coming in studio with us.

I bring up the example of she and just to get us started about how companies are thinking about where they're going to list when they're making these decisions, what do you think is the biggest driver of that right now?

I think part of it depends a little bit on first.

Thank you for having me.

Uh, today I really appreciate it.

Uh, pleasure to be here.

Uh, part of the decision goes into, um Where's their client base?

How do they think about their business?

Um, how well are they known in certain markets where the comparables, um that they may look to for, um, from a valuation perspective, Um, and also where the target investor universe is.

So there's a lot of different dynamics that go into, um, how companies think about, uh, the IP O process, where to list and importantly when to list.

We've seen, uh, a pretty significant increase in activity, as you know, uh, versus where we were last year.

At this point, Um, we're up about 80% in the US, uh, similar levels globally.

And I think that's a very constructive environment for, um, companies and for investors.

Doug, talk to us a little bit more about that activity because we certainly have seen an increase in the IP O activity going back over the last couple of months.

What does that signal in terms of the second half of the year?

Lots of uncertainty.

Obviously, when it comes to the Fed, when it comes to rates, when it even comes to the election, do you think we'll see some of that IPO activity sidelined until towards the end of the year?

Or how are companies thinking about that?

Look, the pipeline is absolutely building.

The dialogue is great.

I think companies are still trying to work through some of that.

Part of it is the market dynamics, but part of it is their own performance.

I think lots of companies are going through their forecasting exercises.

How would they have done if they were a public company?

And so the one thing we do know is companies will be better prepared to be public companies when they come.

Uh, I'm not sure if it's all going to come in the second half of 2024.

Probably not.

We you know, when we think about the windows of going public between now and the end of the year, we've got a couple of windows, but there's a lot of uncertainty as you talk about.

I do think 25 and 26 we're going to see a significant amount of that pipeline come to market.

What's the catalyst for those companies getting off this island?

Is it just simply looking at their business?

I guess how much of the macro factors have been factoring into some of these decisions versus just the stability of their own balance sheet.

I think the macro factors are influencing individual company performance, and so they're trying to factor that in.

So we spend a lot of times with companies talking about what are their KPIS, that they'd go to market and how would they perform relative to those KPs if they had been public and importantly against their forecast, how would they perform?

And so, given the right environment, given some of the economic aspects given regulatory challenges that some companies face, you know that's factored into it.

And so they're trying to weigh all of this and decide when is the right time to go public and be a good public company, not just go public.

Obviously, the rate cycle is one big factor for these companies, but I'm curious about from an equity perspective, just the crazy valuations that we've seen.

Are you seeing that have an impact on what companies are expecting when it comes to valuations heading into IPOs?

Are they looking around and thinking, How do I not have the biggest valuation possible before this IPO?

The valuations are certainly one of the drivers for companies to go public, but it's one of the drivers, you know, um, often times it's what does it mean to be a public company What is the strategic value of being a public company?

The branding.

So, yes, it's important for going public.

But then the sustainability of that in the aftermarket also becomes important.

And so lots of companies trying to evaluate when is the right time to go?

How do I think about valuation near term, but also longer term.

And what are the growth and and margin aspects that they're trying to project to the market?

What do you see in terms of the take private activity?

Because I believe right around record levels, right?

Yeah, we are there.

There are a lot of companies, you know?

Well, we we focus on what the indexes have done, and the S and P is up 15% uh, year to date.

And you know, when you look at the equal weighted index, not every company has actually performed at that level.

NVIDIA is about a third of that performance year to date.

And so lots of companies haven't been, um, caught in this updraft that we've seen in in the broader equity markets.

And so for some of them, they have to wonder whether or not they're getting properly valued in the public market.

So we have seen an increase in activity of companies thinking about you know it.

I better valued in the private market than in the public market at this period in time.

What is that decision looking like then, for those companies?

Do you expect to your point, Shawna, Do you expect that to continue to be a trend moving forward?

I think you know, there's a lot of money in private equity hands.

It's, you know, closing in on $3 trillion.

And you folks have talked about it on many of your your broadcasts as well.

So you know, the real question is, how do we think about the trade off of being a public company, the value of being a public company versus the value of being a private company?

And so every company kind of evaluates that their boards evaluate it, the management teams evaluate it and, you know, really trying to figure out how to get how best to get value for all of their stakeholders.

All right, Doug, we gotta leave it there.

But thank you so much for joining us.

We really appreciate it.

Thanks for coming in as well.

That was Doug Adams.

He is city's co head of equity capital markets