Akalın Finance IPO Trends 2024 Report: Mid-Sized Companies and the Industrial Sector Take Center Stage in IPOs

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Akalın Finance IPO Trends 2024 Report: Mid-Sized Companies and the Industrial Sector Take Center Stage in IPOs

The "Initial Public Offering Trends Report 2024," providing comprehensive analyses of public offerings in Turkey, has been published. According to the report prepared by Akalın Finance, while mid-sized industrial companies were prominent in public offerings last year, investor interest fluctuated throughout the year. Alper Akalın, the Founding Partner of Akalın Finance, predicts that interest in public offerings will increase with the decrease in interest rates in 2025.

Interest Rate Cuts in 2025 May Present New Opportunities for the IPO Market

Alper Akalın argues that the expected gradual reductions in interest rates in 2025 will bring both opportunities and risks for the public offering market. He noted that mid-sized companies and the industrial sector stood out in public offerings in 2024, stating, “The decline in borrowing costs and the stable exchange rate in 2025 may make borrowing more preferable than public offerings for some companies. However, in an environment where real interest rates will still be high, public offerings will maintain their importance as an attractive financing method.”

Highlights and Evaluations from the "Initial Public Offering Trends 2024 Report":

What Happened in 2024?

  • The BIST IPO Index lagged behind the BIST-100: In 2024, the BIST IPO Index saw a 2% decrease in USD terms, performing 11% lower than the BIST-100 Index. Although the IPO index exhibited a weak short-term outlook, its long-term performance shows a remarkable advantage. Between December 31, 2020, and December 31, 2024, the annual average compound return of the BIST IPO Index was 33.0% in USD terms, providing an annual average additional return of 22.2% compared to the BIST-100 Index despite the poor performance in 2024.

  • Number of IPOs and Revenues: The year 2024 saw the total number of IPOs decline to 34, the lowest level in the last four years. IPO revenues fell to 1.8 billion USD, down 43% from the previous year. This decline was significantly impacted by rising real interest rates making borrowing instruments more attractive, adversely affecting the performance of the stock markets.

  • Industrial and Technology Sectors Stand Out: The industrial sector maintained its sectoral leadership by capturing 58% of IPO revenues. The technology sector reached its highest level in the last four years with an 11% share. In contrast, there was a marked decline in the number of transactions and IPO revenues in the services, energy, and real estate sectors.

  • Decrease in Investor Participation: In 2024, the number of individual investors recorded a strong performance with 2.5 million people in the first half of the year, but decreased to an average of 500,000 in the second half. This decline was seen as a reflection of reduced investor risk appetite alongside the stagnation in stock markets. The average number of investors for the year was recorded at 1.8 million.

  • Valuation Indicators: The pre-IPO stock values indicated an average FD/EBITDA multiple of 8.2x in 2024. It was observed that FD/EBITDA multiples were higher in the technology and energy sectors compared to others. The IPO discount reached 27%, the highest level in the last four years.

  • Increase in IPO Applications: In 2024, there was a significant increase in companies applying for IPOs due to rising borrowing costs. It is estimated that by the end of the year, there were 115 companies that had applied for IPOs and were in the process of it. Considering that the average number of IPOs over the last four years was 45, it is noted that there has already been a significant application intensity, indicating that the acceptance process would take at least two years.

Expectations for 2025: IPOs Will Maintain Their Attractiveness

The report indicates that the anticipated gradual reductions in interest rates in 2025 could create both opportunities and risks for IPOs. The decline in borrowing costs and the stable exchange rate may make borrowing preferable to public offerings for some companies. However, in an environment where real interest rates remained high, public offerings are expected to retain their importance as an attractive financing method. Additionally, the report assesses that interest rate cuts could significantly increase individual investor interest compared to this year. However, it is also anticipated that investors will exhibit selective demand for public offerings with a cautious valuation approach.