The Zhitong Finance App learned that a senior Citigroup banker said that several technology companies are considering listing on the US exchange in the fourth quarter of this year, thereby increasing the number of potential IPOs.

In view of the risk of market fluctuations caused by the US presidential election, signs of economic slowdown, and uncertainty about the speed at which the Federal Reserve will cut interest rates, bankers have lowered their expectations for new stock listings for the rest of 2024.

However, Paul Abrahimzadeh, Citigroup's North American equity capital market co-head, said in an interview last week that technology companies may benefit from demand for high-growth stocks. High-growth stocks are considered more resistant to economic slowdown, and their valuations generally benefit from lower interest rates.

“No matter what kind of macroeconomic chaos may occur in the US economy, these companies should have a strong reaction,” he said.

So far this year, the size of US IPOs has jumped to 32 billion US dollars, an increase of more than double that of last year. The reason is that various companies have seized the opportunity of the rise in the stock market. Just two months ago, the rise in the stock market was still driving major stock indexes to new highs.

Despite this, the size of this year's IPOs is still only a fraction of the more than 240 billion US dollars in the same period in 2021 (before the Federal Reserve raised interest rates). According to data compiled by Bloomberg, the size of this year's IPOs is also lower than the average of ten years before the outbreak of the epidemic.

A number of banks, including Citi, the world's number one IPO underwriter so far this year, are hoping to increase listing activities in 2025. Abrahimzadeh said this was partly due to the increase in the number of meetings the company had with potential advisors prior to listing.

However, the lack of urgency may reflect recent stock market fluctuations and the decline in stock prices of some newly listed companies. Although the overall performance of major IPOs was good, the overall performance was mixed, with Reddit (RDDT.US) up 65% and Ibotta (IBTA.US) falling more than 40%.

Abrahimzadeh said: “Due to scarce value, transactions in high-growth, high-price-earnings industries are receiving significant excess demand, and in many cases, they are perfectly priced. Buyers believe that aggressive valuation of the IPO market is reasonable. This is due in large part to expectations for the performance of listed companies. If the company fails to meet investors' expectations, this may cause market performance to fluctuate after listing.”

The market generally expects the Federal Reserve to cut interest rates next week and continue until next year. This may help stimulate the listing of some new stocks, especially if the US economy continues to avoid recession. The swap market reflects that the Federal Reserve's benchmark interest rate will be adjusted by a full percentage point around December and fall to around 3% by mid-2025. Interest rates are currently in the 5.25% - 5.5% range.

Abrahimzadeh said: “The reality is that there is no shortage of demand for new shares. Growth is back in the mainstream, and this trend will only accelerate as interest rates fall.”