What Does 2024 Have In Store For The IPO Market? Eric Krull - Manager of the EJK Growth Fund - video Dailymotion

Benzinga

- SKIMMS eyes IPO (kardashian-backed slim wear) - Krull believes AI will come for white collar jobs before blue collar jobs - IPO market expected to stay cool until market, "maybe by mid year if we can get a durable uptrend" we could see more IPOs

Transcript

00:00 Good morning to you Eric. I saw you in the background there smiling and stoppers

00:06 We've been too mellow dramatic today about the markets or just give us your overall feel

00:13 I mean, you're you're a market veteran here and man, what a run we had at the end of

00:19 2022 before we get to the IPO market. Yeah, I know you're active in investing. How you feel about the market up here?

00:27 Well after a nine week in a row rally after November 1st kind of like follow-through day

00:33 It's been a great market for a while. And then now I don't like the way the IWM is going there's small caps

00:39 It's that's not good

00:41 That it's nice to see some industrial stocks doing well, but even those are taking a pause

00:46 but like Dennis was saying just recently if it's not AI these no one seems to be interested and

00:53 You know just you know following up with what Dennis was talking about

00:57 I'm the less worried about the blue-collar jobs going away with AI

01:01 Because when I think about blue-collar jobs, I think about people working with their hands. I think about plumbers carpenters those kind of things

01:08 I I don't see that being taken over by AI. Maybe they'll use AI to help diagnose a problem

01:13 I see more white-collar jobs going away

01:17 Knowledge workers that kind of a thing

01:19 I'm also thrilled by the fact that from what I've read in the past

01:23 You know, they train AI to look at

01:26 Like oncology reports and they look at x-rays and they look at MRIs and they could find cancer better than the best doctors

01:33 So those are their good things. Well one thing that could help the market broaden out Eric, I guess is new companies

01:39 Coming to the market. What do we what do we see in this year in terms of IPOs?

01:44 What are some IPOs that you've been watching?

01:47 You know throughout the last few months

01:50 Well, it's interesting. I had a graphic that showed how many IPOs came out last year. Yeah, let's talk about

01:56 2023 here for a second and kidnap before we go into

02:00 2024 it was a slow year, huh?

02:04 It was a very slow year the third slowest in the last 14 years both in numbers of IPOs and in dollars raised

02:10 And if you look at the dollars raised it was 19 billion

02:14 You know the one last year in 2022 was even worse

02:18 But then you look at 18.8 billion in 2016 and these are not inflation adjusted

02:24 So really this was even Lord's and probably than 2016

02:28 So it was not as cold as Detroit was the last few days, but it was pretty pretty slow and icy this year

02:33 in 2023 for IPOs and

02:36 180 IPOs a lot of more biotechs. So it's slightly up. It was mildly better than the prior year, but it's still slow

02:44 well, so

02:47 So Eric, I mean right now I guess are there any on the horizon that we're looking at that might be interesting

02:53 Or do you think you know?

02:54 We got to wait for this bear market to kind of play out before we start seeing more companies that want to go public

03:00 in this space

03:02 it usually takes about two years after a bear market before the IPOs start rising again the number of them and

03:09 We'll see a few will probably test the waters

03:13 There's a company out there skims one of the Kardashians and is involved with it. It's fashion that

03:20 looks like it's more toward the the you know, the regular woman not the the supermodel thin people and

03:27 That one looks like it's getting a lot of talk

03:30 and

03:32 There's a few others on the horizon that I'm just looking for but right now

03:37 I think it's gonna be cold for a while and not too many and then maybe by mid-year

03:42 If we can get a market rally if we can get an you know, a durable uptrend

03:47 I would be looking at more IPOs April May June that time period because the best companies come out when the market's good

03:53 Let's talk about

03:56 Probably the primary reason that we're not seeing a lot of IPOs and then just like the overall, you know interest rate environment

04:04 Right, you know companies wanting to do financing or you know come public

04:10 I mean how much do you think that what happens in the IPO market depends on what the Fed does in?

04:17 2024

04:19 It's you make a great point because think about you go back to three years ago one of us, you know quarter percent

04:25 Fed funds rate and money was free and easy

04:29 and you get all these IPOs come out because a lot of them have debt and they're trying to finance it with you know,

04:37 all the angel investors and you're looking at private equity and

04:41 When they start getting higher rates

04:44 private equity is not so

04:46 happy to hand out money so quickly and

04:49 You're looking at little biotechs. They make there's a lot of IPOs in the biotech area and they make no money up front

04:56 They're always, you know looking at a potential breakthrough product and it's harder to get money as time goes on

05:01 When you have higher, you know rates and the same thing with tech companies, you know, they burn through money

05:06 and

05:08 It's gonna hurt and when when the Fed starts to ease rates if they do

05:11 That'll help the IPO market

05:14 And to your point about companies waiting longer now

05:18 I mean

05:19 Do you think that it's is that bad for investors?

05:22 Like if you were able to buy Apple when it went public if Apple was going through its same growth today

05:28 Instead of the 80s it probably would have waited a lot longer to go public and maybe people wouldn't have been able to get in

05:34 that early

05:36 I mean, is that a problem for everyday retail investors?

05:39 We've talked about it me and my co-authors about how the longer companies wait

05:45 It seems like a lot of the air is out of the balloon by the time of the IPO and meaning like right growth

05:51 Is already there. They're really overvalued. They're really high valued and if you look at especially the last two years

05:56 How many stocks IPO and then just go down and they don't just drop a little bit

06:02 They'll drop like 30 40 50 sometimes 70 percent from their day one

06:06 Opening price till they finally trace a bottom and then go another one or two years

06:12 and then they start to go up, but a lot of them have dropped a ton a

06:16 Large number of them that have come out in the last two years that have dropped and I showed that one slide

06:23 With a histogram you're looking at 75 percent of IPOs

06:30 That one right there are trading below their day one closing price of the of the ones that came out in the last two years

06:37 Three quarters of them are at a loss from what the day one close which is a large number. It's more than normal

What Does 2024 Have In Store For The IPO Market? Eric Krull - Manager of the EJK Growth Fund

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