Craig Coben, former global head of equity capital markets at Bank of America and now a contributor to FT Alphaville, dives into the current state of IPOs and the rising influence of private equity. He discusses why companies are staying private longer and the challenges they face prepping for an IPO. The conversation touches on the regulatory impacts on public markets and contrasts the recovering US IPO landscape with struggles in Europe and Asia. Coben also shares insights on the societal importance of robust public markets.
The anticipated rise in IPOs for 2024 reflects optimism from companies and private equity backers eager to capitalize on favorable market conditions.
The trend of companies remaining private longer alters public market dynamics, as high-performing firms choose not to list, impacting investor enthusiasm.
Deep dives
The Surge of IPO Activity in 2024
There is a predicted surge in initial public offerings (IPOs) in 2024 as many companies and their private equity backers are eager to enter the stock market. With many analysts suggesting that the market appears robust, firms are preparing their offerings and strategizing to capitalize on favorable conditions. The preparation for an IPO is extensive, often requiring nine months or longer, as companies must reshape their internal systems and present compelling marketing materials to attract investors. Despite recent sluggishness in the IPO market, the anticipation for a rebound reflects a mixture of optimism and caution among financial industry players.
Shifts in Company Ownership Trends
More companies are choosing to stay private for extended periods, which significantly alters the landscape of public market listings. This trend is driven by a desire among companies to avoid public scrutiny, as well as the financial advantages of remaining private while achieving successful growth before considering an IPO. Well-known private firms, such as SpaceX and OpenAI, illustrate this shift, as they have no immediate plans to go public despite their substantial valuations. Consequently, this creates a situation where the strongest companies do not enter public markets, and lesser-performing firms that do list may not resonate with investors, further dampening public market enthusiasm.
The Impact of Regulation on Public Markets
Regulatory changes have had a profound impact on the dynamics of public markets, leading to a more challenging environment for IPOs. Past initiatives, such as those aimed at separating broker research from investment banking, have resulted in a decrease in quality research and support for smaller companies seeking public listings. Additionally, pension fund reforms have shifted financial resources away from equities and into bonds, further diminishing investment in the stock market. The consequential lack of substantial IPO activity calls into question the health and future of public markets, prompting discussions on potential reforms to restore balance and engagement with investors.
The road to riches used to be paved with juicy IPOs. But that does not seem to be the case anymore. Today on the show, Katie Martin is joined by Craig Coben, a former global head of equity capital markets at Bank of America, and now a contributing writer for FT Alphaville. They discuss regulation and demand, and the growing role of private equity in corporate ownership. Also, they go short France and long melodic house music.