The IPO market in the US is picking up pace again after months of stagnation. However, market participants have shifted into the wrong gear. Despite the successful debuts and increased listing announcements in recent weeks and months, there is by no means an outlook for consistently smooth sailing. The liquidity situation in the financial markets is showing no signs of relaxation. On the contrary, the Federal Reserve is open to potential interest rate hikes, and the majority of traders at the world's largest futures exchange CME are already positioning themselves for further restrictive actions by the central bank by the end of the year.

The liquidity shortage is causing promising candidates for Initial Public Offerings (IPOs) to pursue new private financing rounds at significantly reduced valuations, which is likely to delay their stock market debuts. For instance, in January, the online payment service Stripe announced its intention to make a decision about going public later in the same year. In March, the company then raised $6.5 billion, but its valuation was only $50 billion. In 2021, Stripe, was hypothetically still valued at $95 billion. Since the funding round, there has been no update from the payment service regarding a potential IPO. Additionally, the disappointing recent quarterly results from its Dutch rival Adyen have weighed on investor enthusiasm for payment service providers. This is likely giving Stripe further reasons to avoid a critical assessment in the public market for the time being.

Certainly, the pipeline has filled up: Following the chip designer ARM, the marketing service provider Klaviyo and the food delivery service Instacart have recently announced stock placements. However, the year has been notably weak in terms of IPOs. Even with the listings of the restaurant chain Cava and Kenvue, the consumer goods subsidiary of Johnson & Johnson, the IPO volume in the United States for 2023 has amounted to only $13.1 billion so far. Even if all the rumored deals on Wall Street materialized, the market would likely only scratch the average volumes from the pre-pandemic years.

Meanwhile, the response to some completed primary market deals is less positive than it may seem. Vietnamese automaker Vinfast, which debuted on the Nasdaq in August through a merger with a special purpose acquisition company (SPAC), was worth much more than Ford and General Motors combined at the beginning of this week. However, this development doesn't stem from the enthusiasm of a large number of market participants. In fact, almost all investors who were involved in the acquisition vehicle Black Spade preferred a cash payout after the merger instead of taking Vinfast shares. The SPAC, which raised $169 million in its IPO two years ago, was left with only $13.6 million after the share redemptions. Furthermore, only 1% of Vinfast's shares are freely tradable, causing even a few bids to result in significant price fluctuations. It is also likely that harsh setbacks after such artificial rallies become the norm, which the Vinfast investors might unfortunately come to experience.

There are also interesting parallels with the upcoming IPO of the British chip designer ARM on the Nasdaq, which is scheduled for September. Vinfast investors anticipate a continued boom in electric mobility, while the semiconductor developer aims to capitalize on the AI hype. Additionally, the Japanese technology investor Softbank plans to bring only 10% of the British company to the stock market. This would place the free-float market capitalization in a range where artificial overheating can easily occur. Chip companies Nvidia and Intel, both of which Softbank intends to have as anchor shareholders, also seem to envision a significantly lower valuation than the Japanese technology investor. If Softbank faces another setback with the ARM IPO in New York, the engine of the recently revived IPO market in the US might quickly sputter once again.