Only a week ago, the enthusiasm for tech IPOs in New York was reignited after a 18-month drought. However, the fact that the US Federal Reserve is keeping interest rates high and may even raise them further has abruptly ended the excitement.

The stock of British chip designer ARM was traded below the IPO price for much of Thursday, and the price fell for the fifth consecutive trading day, erasing almost a quarter of its value at its peak. A day earlier, the stock price of Instacart, a food delivery service, briefly fell below its debut price. Although the stock stabilized on Thursday, it is about 29% below the peak reached on Tuesday. While the stock price of digital marketing company Klaviyo increased by about 3%, it remains well below the levels reached at its debut on Wednesday.

This also means headwinds for the three German companies that have just launched their IPOs – pharmaceutical packaging specialist Schott Pharma, tank transmission manufacturer Renk, and sandal maker Birkenstock. Schott Pharma's managers are currently in New York to promote the stock, which can be subscribed to until Wednesday (September 27). The price range has been set so that the valuation, at around 16 times the 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA), is roughly in the middle between German competitor Gerresheimer and Italian competitor Stevanato, who is listed in the US.

According to financial sources, this corresponds to the feedback the IPO banks Deutsche Bank, Bank of America, and BNP Paribas received from investors during the pre-marketing phase. Therefore, the price range was not a surprise to the market. In addition, the Qatar Investment Authority has already committed to purchasing shares worth 200 million euros.

It could be more challenging for tank transmission manufacturer Renk, which is owned by financial investor Triton. Renk is expected to announce the price range on Monday (September 25). The lead banks are Citigroup, Deutsche Bank, and J.P. Morgan.

Birkenstock is also likely to be affected by the downturn in sentiment in the US. The sandal manufacturer plans to go public in New York. The IPO of the company based in Linz am Rhein could generate up to 1 billion dollars in proceeds. The majority of the company is owned by US financial investor L Catterton and French billionaire Bernard Arnault.

Not only have the opening gains of the three US tech IPOs largely evaporated, there has also been a decline in the broader market. The signal from the Federal Reserve that it could raise interest rates again in 2023 and is almost certain not to cut them anytime soon caused the S&P 500 to drop by nearly 1% on Wednesday. On Thursday, the index fell by 1.6% to its lowest level since June, marking the sharpest decline in six months.

The announcement that interest rates will remain high for an extended period dampens investor sentiment for young companies that need cash for expansion and whose valuations are based on discounted future earnings. It could also lead some European IPO candidates – German fuel card provider DKV Mobility and British financial investor CVC, who also planned to go public in 2023 – to reconsider the timing of their potential debuts.