Interview
What’s Driving the Latest Wave of IPOs?
- Goldman Sachs' IPO business has shifted from a "stay private longer" era (2000–2016, averaging 1–2 large IPOs annually) to a "super cycle" defined as the new normal since 2018.
- Since 2018, Goldman Sachs has executed more than a dozen IPOs with valuations exceeding $1 billion annually, including both U.S. and international enterprises and consumer companies.
- The average valuation for these large-scale IPOs is nearly $20 billion.
- Tech companies have driven the current wave by rapidly addressing evolving consumer needs in sectors like grocery delivery, video conferencing, and online commerce following pandemic disruption.
- Companies that went public in 2018–2019 have, on average, more than doubled their value in public markets, validating the growth-chasing behavior of investors.
- December 2023 will see four IPOs of significant scale, a volume described as "incredibly atypical" compared to historical averages of one or zero.
- The concentration of December IPOs resulted from companies pausing IPO preparations during the initial COVID-19 shock and restarting only after markets rebounded in the summer.
- The 2023 election year created a compressed issuance window, delaying potential deals until after Thanksgiving and concentrating activity in December.
- Capital markets have seen a surge in innovation, with non-traditional pathways to public status becoming standard, including direct listings and SPACs.
- Specific capital market innovations now align with distinct company objectives:
- Direct listings are utilized by companies aiming to minimize dilution and avoid raising primary capital.
- Creative lockup structures are being implemented to provide employees with early liquidity during IPOs.
- Goldman Sachs is enhancing IPO pricing processes by providing companies with greater data and insight regarding investor selection and valuation.
- Investors in the 2021–2022 timeframe are prioritizing businesses that have established durable competitive advantages capable of normalizing post-pandemic operations.
- Investment strategies remain diverse, targeting both rapidly grown businesses and those that reset during the pandemic but are accelerating as global economies reopen.
- Goldman Sachs forecasts that IPO volumes will remain high in 2021, maintaining the pace of more than a dozen billion-dollar-plus deals seen in 2020.
- The current market operates in the top decile of valuation environments, yet Goldman Sachs projects sustained value creation driven by tech innovation, share growth, and a low-interest-rate environment.