US IPO volume is set to cross $200 billion this year to set a new record – and while concerns about a market bubble are rising, Goldman Sachs points to increased activity as market normalization. With about 60 U.S. IPOs this year, activity remains close to the 25-year average of about 100 deals a year, well below the nearly 400 listings seen during the dot-com peak in 1999 or when more than 250 companies went public in 2021. Goldman Sachs’ chief U.S. investment strategist said in a report Wednesday. Owen Lamont, senior vice president and portfolio manager at Acadian Asset Management, however, described the rise in equity issuance as “one of the four horsemen” of the market bubble, adding that companies naturally prefer to sell stocks when they believe their equity is overpriced. “IPOs are like bananas: they need to ripen before they’re ready to eat,” Lamont said, advising investors to be patient instead of chasing newly listed stocks immediately after trading begins. There are also concerns about whether investors can absorb the new supply, especially as the post-IPO lock-up period expires in 2027. Jay Ritter, director of the IPO Initiative at the University of Florida, agrees with Snider and sees the concerns about underfunding as overblown. He said U.S. public companies return about $1.6 trillion to investors annually through dividends and share buybacks. Large amounts of cash must be pumped back into the market, providing more liquidity to absorb new listings. European and Hong Kong companies raised more than 200 billion euros in securities over the past 12 months, but net capital outflows, after accounting for redemptions and repurchases, remained slightly negative at -0.2% of market value. Peter Oppenheimer, head of global equity strategy, and Guillaume Jaisson, senior global equity strategist at Goldman, said the region’s main challenge is not corporate oversupply, but a lack of domestic capital inflows. “The main contrast between the IPO landscape of the United States and Europe revolves around the issue, but the flow,” they wrote in the report. As a result, the number of European IPO deals remained suppressed at about 40 last year, compared to the historical norm of about 100. In contrast to Europe, Hong Kong’s IPO market turned around strongly last year, after several years of slowdown, and the momentum has continued this year. After averaging just $10 billion a year between 2022 and 2024, the Hong Kong list is expected to grow to $37 billion by 2025 and is on track to reach $60 billion by 2026. According to the report of Goldman. Total financing in Hong Kong, including secondary financing, is expected to reach US$110 billion this year. Si Fu, Goldman’s senior China equity strategist, attributed the increase in investment to looser policies, supportive Hong Kong investment regulations, and a wave of “A-to-H” dual listings as Chinese companies seek foreign capital. Additionally, post-IPO performance in Hong Kong has outperformed the historical average, with listings generating an average return of 60% in their first three months. Goldman expects annual demand of more than $400 billion, driven by corporate buybacks, Southbound funding, and global sovereign wealth funds.
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