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Welcome back. This edition unpacks why companies are hitting pause on IPOs, and what that means for executives, workers, and investors.
Plus, economists dissect the September jobs report.
Paid members: This week you get a peek at my events calendar (and an invite to an upcoming dinner!). Plus, Soxton founder and CEO Logan Brown shares her perspective on eventually going public — or not.
New on the podcast (sponsored by FIS) — Melissa Cullen, FIS’s head of regional and community banking, talks deploying AI cost-effectively and the demographic shifts impacting financial services.
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The Rising Tide:
More Discernment
An ice sculpture of a bull sits beside a table of salads and pizza at Soxton’s IPO-themed party on Vanderbilt’s new NYC campus in Chelsea. (Photo: Hope King/Macro Talk)
Three hours after hopping off an Amtrak at Newark from Boston on Tuesday, I found myself staring at an ice sculpture of a bull in a converted Gothic-style seminary hall on the west side of Manhattan.
The bull was the centerpiece of an IPO-themed party — and it was melting.
Symbolic, I thought.
Another company had delayed its IPO that day — a fourth pause in less than two weeks.
Let’s back up
The company was Oura, the smart-ring maker. And its postponement on Tuesday (Sept. 29) came after nuclear tech company Holtec (Sept. 16), home insurer Bamboo Insurance (Sept. 22), and metal powder manufacturer Amaero (Sept. 23) shelved theirs.
Holtec blamed “impaired investor confidence” toward IPOs and days later withdrew its IPO filing entirely.
Bamboo reportedly paused over market conditions, per Bloomberg.
Amaero noted “adverse market conditions” for delaying its U.S. listing.
Oura pointed to “uncertainty in the IPO market” in its official announcement.
What’s really going on?
“The broad answer is valuation disconnect,” Avery Marquez, Renaissance Capital’s director of investment strategies, told me by phone Thursday.
“They want a better valuation than public investors are willing to give them right now.”
And while market conditions (energy costs, inflation, interest rates) are playing a role, Marquez thinks blaming a “general blanket of uncertainty in the IPO market probably isn't fair.”
“We're very close to all-time highs in several of the major indices, so clearly the market is not in free fall,” she said.
“I don't think we're seeing serious cracks in any type of base demand for new issues.”
In a research note published Thursday, Renaissance Capital said that its IPO index continued to outperform the broader S&P 500 with a 15.9% return YTD, vs. 12.7%.
Should boards and executives care about this pause? Yes.
“Public investors have shown that they are discerning. They want a discount. It's not like every great AI growth story is just going to get a premium nowadays. You need to have pretty much airtight fundamentals if you want to command a premium multiple at the IPO,” according to Marquez.
Perfect conditions to go public really don’t exist, so what are you waiting for? “2020 and 2021 were pretty much as close to perfect conditions as you could get, and that was not a healthy market. So these companies that just keep waiting for the perfect time are just going to keep waiting forever — at some point you just have to pull the trigger.”
Should investors or workers worry? Not really.
“I don't see anything with the companies going public that makes me feel alarmed: not what's coming to market, how they're trading, or the general market sentiment,” Marquez said.
Discerning investors breed “a healthy market. We've seen a lot less hype, a lot less FOMO.”
“There's just slight concern from an IPO perspective about what the IPO window is going to look like in the next six to 12 months. But I am of the camp that I feel a lot more concerned when there is just unbridled euphoria than when there's so much discernment that we're not seeing every company go public at the premium they want.”
What does the pause tell us about the general macro backdrop? Not much.
“It doesn't really tell you if the general economy is healthy or unhealthy. If anything, when the economy is healthy, that breeds innovation and more capital, which is good for the IPO market.”
What do IPOs tell us about the future of the markets? A lot.
“For the general market, it is an indicator of what the market will eventually look like, and what kind of sectors and trends are going to pop up.”
“Because it's so growth-focused, I think that when there is trouble in the IPO market, it does trickle: you'll see trouble in growth. Although it can be a cycle nowadays, with how much AI has infiltrated the broader market at this point.”
Back at the party
I had a slice of pepperoni pizza, then pulled aside host Logan Brown, CEO and founder of legal AI startup Soxton, to get her view on the pause:
“I think that all of the back and forth between the frontier models, like OpenAI and Anthropic, is really just causing mass confusion all around,” she told me.
“People are just trying to wait for the markets to steady themselves before they make any sorts of these decisions.”
As for her own plans to go public? Paid members can read about it here. Upgrade your free subscription to unlock the full Macro Talk experience.
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Decoding:
September Jobs Report
Longtime Macro Talk readers know we focus more on trend lines here than headlines.
The stark contrast between the August and September jobs reports shows exactly why.
Recall:
The 162,000 jobs added was unexpected, so I’m not saying those characterizations weren’t warranted.
But
“It bears remembering, the initial headline number in the jobs report — will be revised twice,” Elizabeth Renter, senior director of economic insights at Life360, wrote at the time. “It should always be taken with a grain of salt.”
With that in mind,
Friday’s payrolls data showed that August’s gains were revised lower by 29,000, and that the economy actually lost 10,000 jobs in July.
September’s initial headline figure of 29,000 jobs added should lead to an equally cautious read.
“Don’t panic,” economist Orphe Divounguy wrote on LinkedIn. “The labor market isn’t breaking.”
Overall diagnosis for September
“August did not signal a labor market reacceleration, and September does not signal labor market deterioration,” per Gregory Daco, chief economist at EY-Parthenon. “The broader trend indicates the labor market has settled into a lower-growth equilibrium, with narrower but still sufficient job growth to keep unemployment broadly stable.”
“There is selective weakening, but the labor market as a whole remains decent,” Rick Rieder, BlackRock CIO of Global Fixed Income, posted.
For boards and executives:
“[M]arkets are pricing in a lower probability of an interest rate hike in October. We still expect a small (25bps) hike in December,” Aaron Mulvihill, global alternatives strategist at J.P. Morgan Asset Management, noted. “A weaker jobs market makes it less likely to raise interest rates. Lower interest rates make it easier for businesses to get financing and expand, thereby boosting their equity value. Lower interest rates (= lower discounted cash flow rates) also increases the equity value of stocks that expect higher earnings in the future, like AI companies.”
But — “businesses still have plenty of reasons to hesitate before expanding payrolls: tariffs, the oil shock from the Iran conflict, and uncertainty over how AI will change staffing needs,” Divounguy cautioned.
For workers:
“The economy looks more resilient than it feels to most workers. That disconnect is fueling consumer angst,” Diane Swonk, chief economist at KPMG, said.
“If you lose your job, finding another one is still harder than it was before the pandemic,” noted Divounguy. “The job-finding probability was 26.4% in September, compared with a 27.6% average in 2018–19.”
The most notable job gains came from healthcare, construction and manufacturing, while information services and financial services lost jobs.
Wage growth also cooled: average hourly earnings rose 0.1% in September, vs. 0.3% in August.
More Job Decoder:
Strategy Talk:
FIS’s Head of Regional & Community Banking — Melissa Cullen
FIS, the fintech giant, created a new role this year to focus on community and regional banking clients.
In the latest episode of Macro Talk, sponsored by FIS, I sit down with Melissa Cullen to learn more about her new role, where she sees community and regional banks competing successfully against big banks, and the macro trends driving the industry’s next moves.
More Strategy Talk:
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