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Pushkin. Where are all the shiny new companies rushing onto the stock market? Those sharp-suited bankers were convinced that 2025 was going to be the big breakthrough year for IPOs. That's initial public offerings or stock market listings to you and me. Pent up demand, they said. Get ready for the rush, they said. It's going to be lit. Well, it's only February, but two things. First of all, it's kind of quiet out there. And
And secondly, and slightly more worrying, the companies that have gone to market have been a bit meh. Today on the show, we're asking, is there anybody out there? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in London, and therefore part of the European stock market miracle that is kicking the US's butt so far this year. Hashtag EMBED.
Team Europe. I'm joined by not one but two of my esteemed colleagues in New York, Aidan Reiter from the Unhedged newsletter and Jen Hughes, our US markets editor. Jen, welcome to the show. Hey there, Katie. You've done this before, right? So we haven't totally put you off doing this podcast yet. Not yet. But you know, this could be the one. This could be it. Aidan, if we play our cards right, we can really mess this up. The hazing will start soon. Yeah.
Jen, you were writing about the sort of humdrum bunch of IPOs, of stock market listings that we've had so far this year in the newsletter the other day while we all fill in for that massive skiver, Rob Armstrong. Tell us what's happening and what's not happening. Yeah, Rob Vacation Armstrong, as we like to call him around here. Vacay. Absolutely. IPOs are one of my favourite topics and I say that with a straight face. You can say what you like. Yeah.
But this year has been disappointing. I mean, going public, it's a vibe thing as much as the valuation and the metrics and the number of shares and the price and all the rest of it. It's a real vibe and momentum thing. And the momentum has just not been there. We've had some big deals and they've just fallen flat. They are not good.
A little bit of context is important here, right? So we've had a couple of years where the stock market has absolutely like blown the doors off, right? We've had two years of 20% plus gains in the S&P 500. But the market for new listings has been like really crap.
Yes. I mean, running through that quickly, 2021 was the best year on record, not even including SPACs, especially the blank check companies, not including those just bog standard, I have a company, I'd like to sell you the shares kind of public companies. 2021 was this record. And
And as the stock market fell and the techs fell in 2022, that just killed the vibe, the market. So 2022 was bad for everybody. 2023, as you say, surprisingly good year for stocks, bumper year.
But the surprise was obviously the companies weren't ready to go public. Plus, we all thought there was going to be a recession that year and it didn't happen. So already listed companies got to benefit. IPOs missed out. 2024, you think, well, recession fears have receded. This should be fine. But you've got the US election. So...
uncertainty, volatility picks up from sort of late summer onwards. Well, frankly, you could say all year on with that one. So that kind of damped it last year. So this year...
in theory, as you've been saying, should be there, yeah. It's all about vibes and the vibe has just been not there the past two years. Yes. And so a lot of these companies that are waiting to hit the public stock markets are already owned by private equity companies. And the narrative running into this year is that these private equity companies have ended up holding on to these
these portfolio companies for much longer than they normally would, much longer than they're normally comfortable with because markets have been a bit sort of weird the past few years. And so the idea was there's this kind of massive kind of waiting list, this pipeline. This is what people in this kind of bit of the market always talk about, this pipeline of companies that are just itching to hit the public markets. But there's been a bit of a disconnect between, so the private enterprises
equity firms have been saying, okay, I think this company is worth, I don't know, say for the sake of argument, a billion dollars. And stock market investors have been saying, hmm,
We think it's worth 500 million. And so there's been this gap. And so the private equity companies have held on and held on and waited for the world to come around to their way of thinking. The idea has been that this year, everyone will agree that they've got to come to some other understanding and agree to disagree. And maybe the private equity companies aren't going to get the returns that they thought they were going to get. But either way, they were going to have to let go of these portfolio companies this year.
I think the other point is, it's not just private equity that is not releasing companies. Other companies that might have IPO'd faster might be holding on because there's just more and more private capital flowing around that they can tap into, whether that be VC, private equity. So some of these startups don't have to go onto the market. But Jen, would you be able to walk us through some of the IPOs from this year that we've seen? What is the vibe of 2025? Sure. And part of the point is, because we've got private equity and so much private capital,
The companies that come into market are bigger, so it's a bigger risk. It's not like a 500 million company. It's a multi-billion company. So whatever they do, the deals are bigger, they've got to find more investors, the rest of it. We've had three this year which has sort of not gone well and set an iffy tone to the whole market, I'd say. So first of all, we had Venture Global. That's an LNG exporter. That's liquefied natural gas to you and me. They put out a price range. They put out the price range initially.
and then they had to virtually halve it.
That's just not good. That says, "Okay, we thought we were worth 46 or something a share. We're actually worth 23 a share." They did that before they actually listed. They made some big hoopla, "We're gonna be worth 46," and then when they actually came out, they had different direction. Yeah. So the bankers go out with a price range, and that could be raised in the US at least, not all countries, but in the US, that can be raised, lowered. And the investors are going, "Mm-mm-mm, yeah, maybe this. I love this company. Get me in." And then they'll raise the price range.
You don't normally get a company that goes out there and starts having meetings with investors with a price range and then slashes it like that. That says you're not in touch with reality. Yeah, you haven't done your homework. No, they're down about a third since listing last I looked. They cut the price at which they listed. And then when they listed, the market marked the shares down even further. Yes. Okay. So that's a bit of a doozy. What else is there? What other happy stories do you have for us?
All right, Smithfields. This is my favorite pork producer. Everyone needs a favorite pork producer. Well, they do. Smithfield is this U.S. arm of it. It's got a Chinese parent. And back in the day when the Chinese parent bought Smithfield, it's about a decade plus ago now, it was when Chinese companies were still able to buy Western ones. And there was going to be some amazing synergy between Smithfield
a US pork producer and a Chinese one, which there isn't. A global pork empire. Well, it's my favorite one because they tried to IPO in Hong Kong with, I think it was 29 banks, which is global record. When you see European names like Rabobank on a Hong Kong IPO,
It's funny. Yeah. Basically, that deal fell apart. Twenty nine banks couldn't even sell this one. The only people that were rumored to make money out of that were the Four Seasons Hotel chain and Cathay Pacific, the airline. So anyway, I like this company. I've kept an interest in it. But they they had their price range and they had to price below. Again, this is just not a good look. Not as bad. The price, I think the bottom of the range was twenty three and they had to price a twenty a share.
But they had to price below and one of the executives had to buy about 10% of the deal. I think it's traded pretty flat since. It's just, again, it's not a good look. It doesn't say this company has got...
and momentum and is cool and you should have a look at it. It's spoiled pork. Yeah. Pulled pork. Yeah. Some pork. I'm kosher. I don't eat pig. You can make up the pork joke, Katie. They didn't bring home the bacon. Oh, there we go. I don't think being kosher precludes you from making decent quality pork-based jokes, Aidan. I just don't have enough experience with the product. Yeah.
Up your game. But what this tells you, right, you have like an LNG deal and liquid natural gas deal that doesn't go terribly well. You have a pork deal that doesn't go terribly well. That tells the next company that's thinking, oh, I'm going to go to market. It says...
It's going to be dicey out there. So have there been other dicey deals as well? Yes. And this one, it's less dicey, but it hasn't done well. So this is one of our private equity ones, CellPoint Software Company, which is bang in the market sweet spot. It's been public before and has come on and off the market. Coming back to market, valuation is okay. And demand was so strong, they raised the price range.
And they priced at the top of that range. Everything was going right. This deal has got the big mo. It's got momentum. It's going in the right direction. The bankers even say the book is 20 times covered. I mean, that's 20 times as many orders as there are shares. That's really good demand. So when you get a deal like that and it prices like that, with that momentum, it should trade up on the first day, right? It should. Are you going to tell me it didn't? Sale point sank gently.
It didn't collapse. It didn't do badly. It didn't rise. A deal like that, they could say, well, it could have been worse. It could. It could have really plunged. But it didn't go well. And IPO should have a small opening day pop at least. You know, a little bit to say to the investors who took the time to get to know the company, hey, look, you're in the money on day one.
This is good. And other people might come along. So if you're an investor looking at IPOs right now, it's like, well, should I bother to meet the company? Or should I just wait till it goes public, wait till it falls a bit and just buy it on the cheap? You know what journalists say, three is a trend. So of the three, even the one that did the best, even it had a somewhat disappointing opening. Yeah. It's share price has risen a bit since.
That doesn't make up for a bad first day. So what do we think, beyond just vibes, are there other reasons that doesn't make as much sense for companies to IPO? We've talked about private equity and access to private capital. Is index inclusion a part of this, right? Are small stocks being found by investors making this worth it? Or is the market just a little too broken for IPOs? That I think is a bigger question. And it was interesting. Somebody emailed me after the Unhedged Corner went out.
and made this point that perhaps the amount of passive investment out there is just shrinking the pool of active managers who look at IPOs. I run hot and cold on this argument. There are people who will blame passive investment for anything, like the milk in your fridge going off, or the weather, or the fact that your favorite company isn't doing that well in the market. I think there's
some truth to it, possibly a fair amount of truth to it, but I'm just not convinced. But I was talking to a banker who does this sort of stuff for a living the other day, someone who brings new companies to markets. And he was saying the big problem at the moment is, and we know this only too well as people who try and write about markets for a living, is that they are
all over the bloody shop. And the minute you think you know what's going on, some kind of pronouncement comes out of the White House that turns it on its head. And there's quite a lot of volatility that ends up not necessarily going anywhere, but just kind of creating quite a lot of churn in the markets. Yeah, it's not reflected in the VIX, but it's there. Yeah. Yeah, it's not necessarily reflected in the VIX index, which is a way of measuring how volatile the market is or how volatile investors think the market is going to be.
but what that does is if you're a company and you want to have the sort of listing where it hits the market and then it goes up 10% in the first day and all of your early public investors are really happy and everyone's smiling and your name is golden and all the newspapers and the financial TV writes about how fantastically this new stock is going. You want to be like,
that guy you don't want to be the guy that's like look at this absolute turkey of a stock that has been a disaster so it just makes that kind of conversation that a company has with its bankers around when to hit the market that bit more complicated when you have got that level of volatility where your stock can do badly on the first day or the first week for reasons that are nothing to do with you and everything to do with just random market volatility so
The volatility in itself really doesn't help here. No. I mean, there's been this rise in people putting money in way out of the money puts on the S&P because they want some disaster protection. What does that mean for the uninitiated? That basically means a form of insurance against the market absolutely falling out of bed because of something that's happened previously.
It could be something that Donald Trump says. It could be something else. So people are thinking, well, at the moment, we're bobbling along. We're taking all these announcements and pronouncements with a grain of salt and waiting for the details. But what if tomorrow it does fall out of bed? So, yeah, there is this sense of uncertainty. And if you're a company and you start the process, it looks bad if you stop before you get there because the market tanks.
So you're right. People are going to be careful about pulling the trigger. Yeah. One piece of this puzzle that we haven't talked about is regulation. Jen, I liked in your piece, you quoted the founder of Robinhood, who talked about a new type of IPO. Could you speak a little bit about that? Yes. From Vlad Tenev. He had a column in the Washington Post last month where he was talking about the benefits of tokenization, which is...
Look, I'm not particularly a fan at this point. I think it sounds like the benefits of blockchain and all the rest of it. Sorry, by tokenization, you mean listing something on blockchain?
Yes, creating tokens in it. The idea being that we could have a smoother path to a company becoming public. It could give normal investors access to companies that are private. Personally, I call that an initial public offering still. I don't think it needs to have a different process. So Tenor from Robinhood, which UK listeners might not, or European listeners might not be aware, it's a retail brokerage effectively. It's a really popular way for retail investors in the States to access the stock market.
So he's saying what, that you should create kind of crypto coin type equivalents of companies that are traded off of normal stock exchanges. Is that the idea? Yes. So it could be after or before a public offering that you tokenize this, effectively create a electronic record. And so it might be easier to get investors into private companies, that kind of thing. So it is an IPO by another name.
I'm just going to put it out there that I think this is a crap idea. Like, if you're going to create like a tradable token that relates to a company, that's a share. That's the stock market. Congratulations, you've invented the stock market, but without any regulations to keep the consumers safe. Well, that would keep a lot of people happy. No regulations, but at least...
I'm just, again, going to say that generally speaking, when you take regulations off financial markets, bad things happen. And normal members of the public and taxpayers end up footing the bill like eight to ten years later. So, again, just putting it out there. Personally, I'm not a big fan of the bill.
think it's a crap idea. Well, when I asked people what regulation was a real problem, the two things that keep coming up or kept coming up were Sarbanes-Oxley and Dodd-Frank. Now, Sarbanes-Oxley followed the Enron scandal, the accounting scandals of that period.
the early 2000s, and Dodd-Frank came after the global financial crisis. So basically... Those are regulations and laws that require markets to, or investors to abide by certain laws. Is that right? They did. I mean, they are burdens on companies, sure, because you have to do things like sign off your accounts now, disclose your executive compensation policies and other such fun stuff. But yeah, these were reactions to...
massive disasters in the market. It's a bit like, you know, if you are close to a building site and there'll be like a big sign outside it that says you've got to wear a helmet and you've got to wear a hard hat and you've got to wear boots and you've got to wear a high-vis jacket and you can only enter the site if you're registered and da-da-da-da-da. All of those regulations exist because some poor sod got killed by not following that rule. Do you know what I mean? Like health and safety rules are not there for just no reason. And it's the same with markets rules. They're there to stop...
stop people getting defrauded and stop terrible things happening so call me old-fashioned and I will no doubt get emails from my usual correspondence hi I'm I'm team regulation personally so look one one last thing just to wrap up on here going back to the IPOs and actually we I
I did a podcast with Craig Coburn who used to do this sort of stuff for a living when he was a banker around Christmas time. So, you know, scroll back and listen to that if you want some more on how IPOs work and all that sort of thing. But like,
To your mind, Jen, who cares? What does it matter if we get new companies in the stock market? Bankers get lovely bonuses out of it. Who else cares? Oh, I think, you know, team small investor over here. Definitely we care because we want more companies to go public. We want companies that you and I can invest in. Our pensions will go into that kind of thing.
So you need those companies to go public. Otherwise, private companies can tell you what value they want. It's not the scrutiny. I mean, one of the pushbacks I got, what if FTX, the Sandbank, went free crypto exchange? What if that had been public? Do you think we'd have had the same problems? Quite a lot to be said for public companies and scrutiny. Aidan, do you care?
I care. Cool. I agree with Jen. We want to be able to see into these companies. Also, you know, if you want to have a good market, you need new innovative companies coming in, right? What if NVIDIA had not listed a couple of years ago? The people who own those shares would not be, you know, gajillionaires now. And isn't that a great part of capitalism that you can make these bets? Like I'm all for markets working and I'm all for people being able to take those shots on small companies that pay off. So we're pro-markets, but we're not pro-chaos. Yeah.
I am also pro going to Longshore.
In the short term, there's going to be a lot of volatility. But in the end, I think what we've seen is that the underlying aspects of productivity may end up being the more profound driver than the fears of government impact from the fiscal or the monetary side for that matter. To learn more about macroeconomic disruption, subscribe to PGM's The Outthinking Investor in your favorite podcast app.
Alrighty, it's time for Long Short, that part of the show where we go long, a thing we love, or short, a thing we hate. Aidan, do you have a long or a short? Yeah, I do. I am short the idea of monetizing the U.S. balance sheet. This is something that Scott Besant said they would do in order to make a sovereign wealth fund. So he's the Treasury Secretary? Yeah, the U.S. Treasury Secretary said they would monetize the U.S.'s balance sheet. If you look at the U.S.'s balance sheet, most of the money is...
loans that are not particularly profitable, right? So student loans, other loans that you couldn't easily sell off, and the rest is property, plants, and equipment. I don't think we should be renting out the left nostril of George Washington and Mount Rushmore. So I don't really know how they're going to monetize these assets unless there's other cost savings they're going to find. So I'm in short the idea of it. I think it's very silly. Okay. Fair enough.
Maybe in contrast, I am long the unexpected. So US foreign policy, gone totally on its head. Domestic checks and balances in the States, gone completely out of the window. And yet markets are like bobbing along, la, la, la, la, la. I'm sure nothing crazy will happen here. I'm just not so sure. I'm just saying watch out for highly unorthodox policy in financial markets because you just never know.
Jen, have you thought of anything yet? So I'm going to go long or at least a little bit long. I'm a journalist. Give me some caution here still. I go a little bit long. The 10-year US Treasury. So this week, Besant, Treasury Secretary, as we said,
came out and said he wasn't going to alter in any quick sense the makeup of sort of the U.S. Treasury borrowing schedule. This is actually quite a big deal for him because this is the guy that before Trump was elected was bashing the Treasury for having done all these short-term bills and not terming out enough debt. So it's been costing the U.S. money. He gets into power and he says, OK, we'll stick with the system I was criticizing.
He says it's path dependent, so it might change over time. But for now, it means we're not going to see this flood of 10-year treasuries, which is probably good for most investors and certainly probably the treasury balance sheet. So you're saying if it was up to you, you'd be buying a little bit of that 10-year bond from Uncle Sam? Yes, just a little bit.
Just a little bit. To hedge your uncertainty. Nice hedging there. Yeah, exactly. Always hedge, ladies and gentlemen. Okay, look, let's wrap it up there. Listeners, we will be back in your ears on Tuesday, so listen up then. Unhedged is produced by Jake Harper and edited by Brian Erstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forges. Cheryl Brumley is the FT's Global Head of Audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler.
FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Katie Martin. Thanks for listening.