IPO market could see 'real uptick' in 2024, Citi's US head of banking says

For the IPO market's full-throttle return, look to 2024.

While the excitement surrounding Mediterranean dining chain Cava (CAVA) and beauty tech company Oddity (ODD) will present some IPO opportunities this year, if you're looking for volume, next year is where it's at.

"We've had a few transactions this year get very, very strong support," John Chirico, Citi's US head of banking, capital markets, and advisory, told Yahoo Finance Live (video above). "2024 is where we would expect to see a real uptick, but we think there's going to be real opportunities towards the end of the year."

If the magic formula for real estate is location, location, location, the corollary for IPOs (and M&A, for that matter) is stability, stability, stability. Like SoftBank-backed chipmaker Arm's reported IPO, the M&A furor surrounding US Steel (X) has been more about the companies specifically than the market generally.

"When you think about a company like Arm or some of these large-cap companies, it clearly could become public whenever it chooses to be," Chirico said.

"When we tend to focus on the large names, everybody [thinks] about the big brand name, large-cap companies," he added. "But the bread and butter of the IPO market is that $200 [million] to $400 million IPO — that's potentially a $2 billion, $3 billion company. I think we're probably looking at the first half of next year, maybe into the second quarter, until we're back at a steady state level that really works."

However, even as the market stabilizes, don't expect anything like the IPO boom of 2021, in which 2,388 IPOs raised $453.3 billion, according to EY data. It was a boom that just wasn't sustainable, and bankers favor something more stable over that sort of IPO deluge again.

"2021 was a bit of an anomaly and because it was as big as it was, I think that's what causes the flameout," Chirico said. "Long term, we'd like to see markets that feel a bit more like 2018, 2019, where the IPO market is fairly balanced."

PitchBook VC analyst Kyle Stanford agreed, recently telling Yahoo Finance that a 2021-style IPO explosion won't be in the cards.

"Markets are back towards close to all-time highs, and a lot of that has been built on the Microsofts, Googles, and Amazons of the world," Stanford said. "I don't think there's going to be a boom like we saw in 2021, and I don't think that's something we should expect. But IPOs — we talk about them as an exit, but it's not, it's kind of a stepping stone that helps companies grow. We might even see a high number of IPOs that could be seen as a boom, and they're not going to be generating a three-times valuation jump like in 2021."

That's not to say there won't be any IPO action this year. But conditions may improve in a market with less macroeconomic overhang.

"We need some stability on the backdrop politically, economically," Chirico said. "And that's, again, why we think '24 could really be back to a stock picker's market, and one where the IPO market could really thrive and be broad."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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