Anchors and small floats mark 2023's IPO comeback
Add Axios as your preferred source to
see more of our stories on Google.
/2023/10/05/1696523074051.gif?w=3840)
Illustration: Shoshana Gordon/Axios
As the initial public offerings window finally reopens, companies taking the leap are leaning heavily on pre-roadshow marketing, anchor investors and small float amounts.
Why it matters: Companies may be going public again, but they're still cautious.
Driving the news: On Monday, Birkenstock touted three anchor investors, including Norwegian wealth fund Norges Bank Investment Management, which have offered to buy 40% of its IPO.
- Instacart's anchor investors (which also included Norges Bank) bought 61%, while Arm had a slew of tech companies sign up as early investors.
State of play: So far this year, IPOs floats (shares available for public trading) have been particularly small. Instacart and Klaviyo were just under 8%, Arm a little over 9%, and Cava was a little above 12%, to name a few.
- That's much smaller than the median 16.7% and average of 18.2% in 2021 (the last full year before IPOs dried up), and 22% for both in 2020, according to data compiled by University of Florida professor Jay Ritter.
- Notably, median floats were historically larger before 2021, mostly staying above 20% (or even 30%) since 1980.
What they're saying: "Oddity is an example of a company that utilized a short float, cornerstone investors and a long marketing period prior to the roadshow while waiting for a window that they could get out," an industry banker tells Axios Pro colleague Richard Collings.
- "They had been speaking to investors for a long time and then performed against that, which was helpful to them when they did come to market," he adds.
Between the lines: "I think we will see the use of anchors as the market opens and I would expect that to decline as the IPO market grows more robust," Lise Buyer, co-founder of IPO adviser Class V Group, tells Axios via email.
Be smart: None of these approaches are novel in and of themselves.
- Some companies used small floats a few years ago, when they didn't need to raise much money via a listing, or planned to do subsequent offerings, for example.
- And IPO anchors have historically been more prevalent in Asia and Europe.
The bottom line: Put together, these characteristics paint a picture of how companies (and their bankers) are navigating the current market and attempting to de-risk the listings.
