Two hot U.S. market debuts in recent months—beauty brand Oddity Tech and Mediterranean fast-casual food chain Cava—are signalling that the market for initial public offerings may be on the cusp of a revival. But for technology IPOs, it still may take some time for a comeback.

In mid-June, Cava’s shares soared on opening day, after pricing its shares at US$22 each, up from an expected US$17 to US$19 range. Last week, Oddity shares opened at a 40 per cent premium on the Nasdaq, also after upsizing its offering.

Both IPOs were interesting for different reasons, said Kyle Stanford, lead venture capital analyst for PitchBook. Cava was backed by venture capital, atypical for a restaurant chain, he said. “It was a win for the industry,” providing good returns to the investors. Cava had raised roughly US$650 million prior to its IPO and was valued at over US$1.7 billion, according to PitchBook.

Oddity, meanwhile, had some private-equity and venture-capital investors, and Stanford said it was a profitable, direct-to-consumer firm with strong brands under its umbrella. It was initially chasing a US$1.7-billion valuation, but then raised that target to roughly US$1.92 billion. In the first day of trading, its market value jumped to about US$2.7 billion.

“These big IPOs are at least showing that public market investors are still OK with the huge valuation before the IPO,” said Stanford. “They still see a return possibility.”

In what remains a shaky market for new issues, there were three other IPOs last month that were expected to be large: Kodiak Gas Services and Fidelis Insurance, which both had lacklustre openings; and Savers Value Village, which received a warmer reception. Investors are also eagerly awaiting the debut of marketing platform Klaviyo. Vancouver-based Modern Mining, an e-waste firm, also filed for a US$10-million IPO on the NYSE American, an exchange for growing companies. 

“The IPO market is showing signs of life,” wrote CIBC Capital Markets analyst Stephanie Price in a late June note, following Cava’s listing.

The activity is good news for the more than 1,000 unicorns—companies valued at more than US$1 billion—worldwide. But, Stanford’s not convinced it will inspire tech firms to try their luck at the public markets just yet.

On the Toronto Stock Exchange, the second quarter of the year was silent for innovation-economy IPOs. No firm in the cleantech, life sciences or tech sectors chose that route to go public, according to data the TMX Group provided to The Logic. Additionally, no firms in those sectors held an IPO on the more junior TSX Venture Exchange.

The TSX continues to see “a very healthy pipeline” of companies wanting to IPO, said Dani Lipkin, managing director of the global innovation sector for the TSX and TSX-V, in an email to The Logic. “It’s just a matter of when, not if,” he said of the firms, noting they’re waiting for more stability in the market. 

There are some signs of that, according to Lipkin, who pointed to how the S&P/TSX capped information technology index rose about 40 per cent in the past year.

Additionally, several of Canada’s publicly listed tech companies have recovered from their earlier market losses, but that rebound hasn’t trickled down to the Canadian innovation-economy firms that went public in 2021, noted a CIBC annual analyst report on the country’s emerging tech companies. Out of 23 innovation-economy firms that held IPOs on the TSX since 2021 and have not since delisted, only two are trading above their opening prices, according to TMX data. Montreal telemedicine startup Dialogue Health announced this week it has agreed to be acquired by Sun Life and will delist from the TSX after the deal closes, which it expects to be later this year. At the end of the second quarter, its shares closed 74 per cent lower than its IPO price.

Eupraxia was up eight per cent from its IPO opening price to the end of the second quarter, while Bausch + Lomb gained 14 per cent. The remaining 21 firms closed down between seven per cent (Payfare) and 99 per cent (Farmers Edge). Lipkin said the stocks’ success should be evaluated over the long term, rather than months.

Depressed stock prices have kept potential new issues on the sidelines, too. “No one wants to be the first one out,” said Stanford. Many are still restructuring their businesses to better appeal to investors who have ditched a growth-at-all-costs ethos. They’re also waiting for headwinds to dissipate, namely inflation, higher interest rates and geopolitical tensions. 

This year, Stanford expects “very few” tech firms to IPO, especially with only five months left in the year and the presumption that roadshows take longer than previously to drum up support. 

Price, however, believes that “technology IPOs may be at the forefront of the IPO revival.” She cited data from PwC that the sector led global IPOs in the first quarter of the year, holding 57 public debuts and raising US$7.1 billion in total.

Artificial intelligence companies, which have been generating strong buzz since the launch of ChatGPT, may be likely candidates for IPOs in the next few years, she wrote. Additionally, CIBC analysts pointed to Previan—a Quebec City-based provider of advanced diagnostic technologies—and Ross Video—an Ottawa-based firm that provides technology to power live video productions—as having said IPOs may be on their future roadmaps.