The Federal Reserve cuts interest rates to clear obstacles, and the US IPO market ushered in a “busy October”

The Zhitong Finance App learned that the Federal Reserve's interest rate cut cleared the way for private companies to leap into the US IPO market as soon as they waited for the green light to shine.

Industry observers said companies from the tech industry to the service sector are expected to publicly submit IPO applications or launch marketing campaigns for such deals in the next few days and weeks after Wednesday's interest rate cut. Many companies considering going public in the fall have been awaiting this decision, and are also watching the performance of newly listed companies, which have performed mixed.

West Riggs, head of equity capital markets at Truest Securities, said, “There must be companies waiting to pass this hurdle, just to ensure there are no surprises. The schedule for October is expected to be very full.”

A range of companies, including Neptune Insurance Holdings and the owner of the University of Phoenix, have publicly submitted documents to US regulators and may begin the roadshow in the next few days after a mandatory 15-day waiting period. Bankers expect more companies to go public, as the US stock market benchmark is close to record highs and volatility indicators show relative calm — conditions thought to be favorable for initial stock offerings.

According to data compiled by Bloomberg, so far this month, 14 companies, excluding SPACs, REITs, and closed-end funds, have raised $7 billion through US IPOs, the highest level in the first 18 days of September since 2020. Riggs said that if the market remains strong, the number of important transactions in October may surpass this month.

US IPO activity picks up after Labor Day holiday

The start of the Fed's easing cycle could create an opportunity for a backlog of companies seeking to go public. Companies hoping to go public in October will need to apply within the next few weeks, or they may delay their IPO plans until 2026 to avoid the typical downturn around the holiday season.

Will Brautigam, head of US capital market transactions at Deloitte & Touche, said that several issuers are expected to update their listing plans to the market, including details such as “schedule, pricing, and schedule.” The Federal Reserve's decision should prompt the company to take these steps because it represents “a piece of the chess board, letting us know how to price the market, which means it will drive demand for more IPOs in the coming weeks.”

Last week, the fall window opened. Since October 2021, the largest number of companies have raised an IPO of US$250 million or more. However, compared to the astonishing summer gains, the performance of companies of this size was more moderate, with the median share price of companies listed this month rising 8.7% at the close of trading on Wednesday.

Performance was sluggish, and the stock prices of StubHub Holdings and Gemini Space Station both fell below the issue price, while the stock prices of Figure Technology Solutions and Kuroiwa Coffee Bar both rose by more than 35%.

However, newly listed companies need to trade well to encourage investors to welcome new entrants with open arms. Brautigam said that seeing more recent stock prices of listed companies fall below the issue price may force the market to re-evaluate the deal.

“There is some good news and warning elements that this tool must continue to pay back to investors,” he said.