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Selection bias: Investors are spoiled for choice

Equity capital markets have been flooded with issuance this year. With so many would-be debutants trying to make the most of the bull run, investors are beginning to grow weary of the glut of potential opportunities.

That is showing in recent IPO postponements. There were 14 deals parked in all of Q2 and there has already been the same number of postponements in Q4, with five weeks still to go in the quarter. Names that have put their listing plans on hold include roofing specialist Marley Group, online watch seller Chronext and Pure Gym.

Public market hopefuls will have to bide their time until market conditions are right and the IPO window is wide open. But it is not just about timing. Certain characteristics can make one float more appealing than another—what do you need to keep in mind before pushing that IPO button?

1/ A trendy proposition attracts attention 

A lot of what makes an IPO in-demand comes down to whether the company in question has something unique or on-trend to offer. If a sector is out of fashion, good luck. But sophisticated—or at least differentiating—technology will go a long way and any marketable USP will certainly help.

2/ The bigger, the better

Size can be a big motivator. Bigger, more liquid deals can attract investors’ attention in an overcrowded market. They have greater visibility and so are likely to attract more demand, plus investors know they can easily day trade shares and won't be locked up with no-one to sell to.

3/ Owners—look before you leap

Cash-rich PE firms have fed this year’s booming IPO pipeline and currently have an eye on year-end results in their portfolio companies. Those expecting strong figures are more likely to choose to wait until 2022. This patience can prove to be a virtue, but founders are often more stubborn in their plans to list. After years of running their business, they want a taste of sweet liquidity ASAP. But that's not always the smartest decision.

Just look at founder-led and TA Associates-backed Eurowag, which chose to press on with a London IPO despite a mild response to its bookbuild. The result? The Czech trucking-services firm tanked on debut, with shares down 10% on the first day of trading. Its stock has since climbed back above its initial offering, but aftershocks like these should give anyone considering an IPO pause for thought.