Since 1995, the global post-IPO performance has offered a return profile close to that of traded equity markets, with on average ~7.0% in the six months after the IPO, ~7.5% in 12 months, ~19.7% in 36 months and ~24.4% in 60 months (long-term average equity returns are ~6 to 7% per annum). In this context, the IPO wave is far from over but should moderate in pace and size. However, we do expect equity markets to avoid a meltdown and converge towards long-term average returns. In fact, periods of extreme negative market performance in 2000-20 led to a substantial shrinking of the IPO market for the next one to two years. due to exogenous factors, change in risk appetite), IPO markets would close shop extremely fast. due to a policy mistake, persisting inflation, etc.), or equity markets were to revert from the current bull run (e.g. Hence, if interest rates were to abruptly rise (e.g. Nevertheless, there are some risks to keep in mind: IPO candidates tend to be particularly sensitive to changes in interest rates, given their relatively long cash flow duration (IPO candidates pay more of their cash flows in the long-term future rather than in the present), and remain extremely vulnerable to equity market volatility. This historically low-rate environment, high equity multiples, improving macroeconomic outlook and implicit central bank “whatever it takes” put protection set the stage for a continuing IPO acceleration.
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