IPO watch 2024: Which new stocks will hit the market?

Key Points

• The U.S. IPO market kicks off on January 11 with Smith Douglas Homes, which expects a valuation of $1.08 billion.
• Companies that may go public this year include Reddit, Databricks, Stripe, Turo, Shein and Klarna. 
• Lower interest rates in 2024 could drive an increase in new IPOs.

What’s ahead for 2024 initial public offerings? 

Among 2023 IPOs, one of the top performers was RayzeBio Inc. NASDAQ: RYZB, a biotech that’s out of play now because it’s being acquired by Bristol Myers Squibb Co. NYSE: BMY.

Other newly public biotech stocks made the list of top IPO performers. Those with an IPO price above $10 include Structure Therapeutics Inc. NASDAQ: GPCR, Apogee Therapeutics, Inc. NASDAQ: APGE and Cargo Therapeutics Inc. NASDAQ: CRGX.

But how will this year’s group of newly public companies look?

Georgia homebuilder first IPO of the year

The U.S. IPO market gets underway on January 11, with Smith Douglas Homes Corp. listing on the New York Stock Exchange under the ticker SDHC. 

This should be a relatively small deal, with the Georgia-based homebuilder expected to have a valuation of about $1.08 billion.

After 154 IPOs in 2023, the second yearly decline in a row, investors believe some highly anticipated companies may finally make their long-awaited public debuts.

Eventually, venture-capital-backed companies need an exit for their investors, so that means some of these prominent businesses won’t be privately held forever. 

Eagerly anticipated IPOs include: 

• Reddit: The social media platform is reportedly aiming for a valuation of $15 billion, despite having fewer daily average users and far less revenue than rivals such as X or Snap Inc. NYSE: SNAP. The company cleaned up its platform a few years ago, ridding itself of unsavory characters and boosting moderation, factors that should be appealing to investors.
•  Databricks:  The 10-year-old data analytics specialist may seize the moment of high AI-related valuations to finally go public. The company raised another round of funding in September and said it reached $1 billion in revenue. Several elements in place suggest the company could price an IPO this year. 
•  Stripe: The cloud-based payment processing system has also been raising more funding, and in a signal it may be inching closer to an IPO, recently brought on board chief financial officer Steffan Tomlinson, part of the team that took Palo Alto Networks NASDAQ: PANW and Confluent Inc. NASDAQ: CFLT public.  
•  Klarna: The Sweden-based buy now, pay later specialist says it has no plans for an IPO, but rival Affirm Holdings Inc. NASDAQ: AFRM is up 329.73% in the past year, which might be giving Klarna investors a touch of FOMO. In addition, Klarna’s venture backers are probably getting itchy for an exit.
•  Turo: The San Francisco company, which specializes in peer-to-peer car rentals, filed to go public in January 2022, but you can cue the “sad trombone” here, as we all know what happened to tech stock valuations that year. The company has filed additional paperwork with the Securities and Exchange Commission, so it wouldn’t be surprising to see it hit the gas pedal this year
•  Shein: The Singapore-based low-cost clothing retailer filed in November to go public in the U.S. It’s raised more than $4 billion from big institutional investors and venture capitalists; that type of funding is typically a sign that a company is approaching an IPO. If, or more accurately, when, it goes public, it would likely be among the year’s largest listings. 

So what could cause an increase in new offerings this year, relative to the past two years?  

Lower rates could mean more IPOs

Lower interest rates could make a significant difference. That’s because a lower cost of borrowing makes it more affordable for companies to finance their expansion plans, including raising capital through equity offerings.

Lower interest rates also make stocks more attractive to investors compared to fixed-income securities, encouraging investment in these fledgling companies.

In general, investors and company managers just have a better sentiment about growth when rates are low. This optimism often translates into increased demand for new shares, driving IPO activity. 

Industry trends can play a role, which could add an element of risk. For example, one of the most prominent and successful IPOs in 2023 was Maplebear Inc. NASDAQ: CART, better known as Instacart.

The market environment favored those tech stocks in 2023, and with analysts eyeing continued growth of AI, cloud computing and cybersecurity, the time could be ripe for more tech IPOs this year.