Several Upcoming IPOs Will Signal How Wide the IPO Window Could Open
This week Nasdaq launched its Nasdaq IPO Pulse Index, which suggests an upswing in potential IPO activity when it is in an uptrend.
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* Prospects for investment banking activity continue to brighten, supporting our recent additions of MS and BAC shares.
* Upcoming IPOs will signal how wide the IPO window could open
The portfolio recently increased its Action Alerts PLUS positions in Morgan Stanley MS and Bank of America BAC and the shares have moved nicely higher as more signs point to the long-waited rebound in investment banking activity.
In yesterdays' Rundown, we shared why Deutsche Bank DB sees a window of opportunity opening for merger and acquisition (M&A) activity, due in part to new stock market highs making the use of stock to fund deals more attractive.
Where Deutsche Bank may be off is in their thinking that companies may rush to get deals done before a potential US recession later this year. With the Flash January PMI data out from S&P Global, a report that showed manufacturing activity is once again growing while the service sector strengthened late in 2023, the economy doesn't look to be headed for a recession. Moreover, stronger new order growth for goods and services suggests that should continue.
Getting back to the improving outlook for investment banking activity, this week Nasdaq launched its Nasdaq IPO Pulse Index, which suggests an upswing in potential IPO activity when it is in an uptrend. Per Nasdaq, the index is now at its highest level since 2021, which is another layer of support for that activity picking up in the coming months.
Also, research firm Renaissance expects 120-170 IPO transactions this year up from 108 in 2023. Included in this year's list are several high profile offerings including Redditt and Panera Brands.
And as we shared on today's Rundown, we will be closely watching the expected IPO pricing for CG Oncology, especially after the company upsized its public offering to 17 million shares with a target range of $16-$18, up from 11.8 million shares last week. Two other offerings we are watching are the ones for BrightSpring Health and the upcoming one from Amer Sports.
Should these deals perform well, it would be another data point arguing for the IPO window to open a bit wider, bringing more deals to market. Such an outcome would give us reason to rethink our MS and BAC price targets with an upward bias.
Action Alerts PLUS is long MS, BAC.