• by Laurie Sullivan  @lauriesullivan, December 29, 2023

About 148 companies completed an initial public offering (IPO) in 2023 -- the worst year on record -- but a glimmer of hope that 2024 will be a better year comes from three insights.

The Federal Reserve, which is set to reduce rates two to three times; an election year usually does well for the general economy regardless of party, and several companies have “patiently waited to go public and now have the numbers to make it so,” Ray Wang, founder of Constellation Research, wrote in a blog.

Constellation's analysis shows a strong IPO pipeline in artificial intelligence (AI), enterprise cloud software, financial tech, and space tech.

Wang sees in the data that “smart money” is leaving trendy categories in clean tech; environmental, social, and governance (ESG); and electric vehicles (EVs) for others.

It's amazing that consumers have entered what Wang calls “a doom spend loop.” They have spent about $2.1 trillion in savings since August 2021 and now sit on about 100 billion in savings, as of October 2023, he wrote -- all in 26 months. A Fed Rates drop, however, will pave the way.

Wang put together an IPO watch list that includes Shein, a fashion retailer in China; OpenAI, the parent of ChatGPT; Databricks, a data and analytics company competing with SnowFlake; Stripe, which distributes payments; Reddit, a social media forum; Canva, an Adobe competitor, and ScaleAI, an AI company.

Elon Musk's companies also are on Wang’s list such as SpaceX, StarLink, NeuraLink, and The Boring Company.

Brian Wieser, who publishes Madison and Wall, believes “a significant amount of M&A is likely to occur among today’s biggest traditional media companies in the foreseeable future. In a research note published earlier this month, he reviewed various ways M&As could take place and the consequences on several different aspects of the business that may result.

Wieser points to the two-year anniversary of AT&T’s spinoff of Warner Media and how the company combined it with Discovery to create Warner Bros. Discovery.  

“As the transaction was structured as a Reverse Moris Trust, the entity needs to remain independent until the two-year anniversary of its creation in order to avoid significant tax consequences,” Wieser wrote.

Wieser lays out several consequences and outlines the changes that Disney CEO Bob Iger has been mulling for the “future of Disney’s media businesses, including the sale of the broadcast network (or maybe just the stations) or maybe just selling several of its linear networks to A&E or selling stakes in ESPN to sports leagues.”

Global mergers and acquisitions (M&As) overall in 2023 fell 17% to $2.87 trillion -- the lowest level in more than a decade, according to Axios, which cites data from the London Stock Exchange Group. Economic worries and a tight financing market drove the decline.

Despite a dismal year, M&A activity in the United Statesfell 6% to $1.36 trillion. However, it was helped by deals that occurred in late December, including a $15 billion deal for U.S. Steel and a $14 billion takeover of schizophrenia drugmaker Karuna Therapeutics.

Japan emerged as the only region that saw acquisition value grow -- up 32% on the strength of a $14 billion takeover of electronics giant Toshiba.

The year's largest announced deal, when ExxonMobil agreed to buy Pioneer Natural Resources for $65 billion, was followed by Chevron agreeing to pay $60 billion for Hess Corp., and Pfizer agreeing to buy Seagen for $42 billion.