US IPO activity posted a mixed performance in April 2023 as eleven deals were priced during the month, 37.5% above the level of deals priced during the same month of last year. In addition, $100 mln in new cash was raised in April – 86% below the $700 mln that was raised in April of 2022.
April 2023 US IPO Activity
According to Renaissance Capital, 11 new deals were priced in April 2023, representing a 37.5% surge from the 8 deals priced during the same month last year, but an 8.3% drop from the 12 deals priced in March 2023. The number of new deals priced during the first four months of this year (40 deals) surged 60% when compared to the number of new deals priced during the same period in 2022.
The volume of new capital raised in April 2023 totaled $100 mln, 86% below the $700 mln raised during the same month last year, and 80% below the total capital raised in March 2023. Over the first four months of 2023, the total amount of new capital raised totaled $2.4 bln – 13% below the amount raised during the same period of last year.
Five of the eleven deals priced during March (45%) came from the Industrials sector where $51 mln was raised; two deals (18.1%) came from the Consumer Discretionary sector where $19 mln was raised; one deal (9.1%) came from the Consumer Staples sector where $19 mln was raised; one deal (9.1%) came from the Financials sector where $11 mln was raised; one deal (9.1%) came from the Energy sector where $6 mln was raise; and one deal (9.1%) came from the Technology sector where $5 mln was raised.
Sixteen (16) new IPOs were filed during April, a 33.3% rise from the 12 deals filed during the same month last year, but an 11.1% drop from the 18 deals filed during March. Seventy-one (71) new IPOs were filed during the first four months of 2023, 18.3% higher than the number of new IPOs filed during the same period in 2022.
The US IPO market posted a weaker performance than the overall equity market during April 2023 as the Renaissance IPO Index fell -5.8% during the month compared to the +0.6% gain for the S&P 500 Index during the same period.
Our Take
US IPO activity was mixed during April 2023. Despite this performance, IPO activity over the past sixteen months was significantly weaker than the robust activity seen during the prior 16 months. This trend, in combination with growing fears of a recession in 2023, is likely to keep a lid on U.S. IPO activity throughout much of 2023. We suspect this weakness will dampen earnings at most investment banks over the next 6 to 12 months.
Consistent with these trends, most investment banks are likely to limit their hiring of equity research analysts and salespeople for remainder of the year. This is due to the weakness in the economy, the US IPO market, and buy-side spending on sell-side research. In addition, we suspect that the SEC’s announcement that the SIFMA “no action” letter on hard dollar payments to US investment banks will not be extended past July 2023 will also dampen investment bank research revenue in the latter half of this year.