IPO Drought Coming to an End, Says Goldman Sachs CEO
The prolonged dry spell in initial public offerings (IPOs) may finally be nearing its end, according to Goldman Sachs CEO David Solomon. Speaking at a summit in Silicon Valley, Solomon expressed optimism about the capital markets, citing signs of life ahead of President-elect Donald Trump’s inauguration.
A Shift in Momentum
Solomon’s comments come on the heels of Goldman Sachs’ impressive fourth-quarter results, which exceeded analysts’ estimates. The tech IPO market has been stagnant since 2021, when tech stocks fell out of favor due to rising inflation and interest rates. However, Solomon believes the mood is changing, with mergers and acquisitions (M&A) and IPOs poised to gain momentum.
Improved Business Environment
The Goldman Sachs CEO attributed the shift to a more constructive kind of optimism, which is driving an improved business environment. He noted that there is a significant backlog from sponsors and an overall increased appetite for dealmaking, supported by an improved regulatory backdrop.
Regulatory Backdrop
Solomon’s comments were echoed by his remarks on Goldman Sachs’ earnings call, where he highlighted the impact of Trump’s election and the shift to Republican power in Washington. He noted that the regulatory environment is becoming more conducive to dealmaking.
IPO Resurgence
While the stock market has experienced a strong two-year run, IPOs have yet to see a resurgence. However, Solomon believes that companies are growing back into their values, paving the way for a potential IPO boom. Cloud software vendor ServiceTitan’s recent debut on the Nasdaq marks a promising start.
Challenges Remain
Despite the optimism, Solomon acknowledged that there are structural reasons why companies may choose not to go public. He cited the higher standards around disclosure and the abundance of private capital available, making it less appealing to be a public company.
A New Era for IPOs
As the IPO drought comes to an end, companies like chipmaker Cerebras and online lender Klarna are preparing to go public. With Solomon’s bullish outlook and the improving business environment, it may be an exciting time for IPOs in the near future.
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