The IPO market gets cold feet

Companies weighing whether to make their stock-market debuts face a critical decision in the coming weeks: pull the trigger soon so they can launch their deals before year-end or hold off until 2025.

The outlook isn’t rosy. The growing consensus among companies considering initial public offerings is to wait until next year, many bankers, lawyers and corporate executives say. It isn’t just the market’s recent choppiness, they say, but that turbulence could flare up again, given the uncertainty around November’s presidential election and how much the Federal Reserve will cut interest rates this year.

Last week, Chinese autonomous-driving technology company WeRide postponed its IPO, saying it needed more time to finalize documents. Ticket-resale company StubHub last month pushed off launching its roadshow for investors until September at the earliest, though some people familiar with the offering say it is likely to be delayed until 2025.

Others on the sideline considering late-2024 IPOs include artificial-intelligence chip maker Cerebras, according to people familiar with the matter.

The idea that 2025 would be the year that IPOs came back has been “singing in the chorus" since spring, said Clay Hale, co-head of equity capital markets at Wells Fargo. There was some optimism that the end of 2024 would at least be busier, but the recent market volatility seems to have all but extinguished those hopes.

“It’s really hard to plan to do deals in the fourth quarter unless you know the market is great," Hale said.

So far this year, companies going public via traditional IPOs in the U.S. raised about $25 billion, according to Dealogic. That is below the $55 billion annual average over the last decade.

One of the popular windows for companies to go public is in the weeks following Labor Day, after a typically slow summer but before many companies’ quarterly financial statements are due.

This August has been far from quiet. Earlier this month, a disappointing jobs report and the unwinding of a popular trade triggered a selloff in stocks. Major U.S. indexes bounced back in the following days after more reassuring data about the economy.

Still, the rout happened just before companies considering new listings for September and early October would need to decide to publicly file with regulators. Once that paperwork is filed, companies have to wait 15 days before they can launch their roadshows to pitch investors.

After a year and a half of red-hot growth, the IPO market went cold in late 2021 when the Fed signaled it would start raising rates. Shares of high-growth but still-unprofitable companies fell as the era of “easy money" came to an end.

There have been some bright spots this year.

When Reddit made its debut in March, the irreverent social-media company’s stock rose 48% on its first day of trading. It remains up more than 70% from its $34 IPO price. Earlier this summer, cold-storage company Lineage raised more than $4 billion in the largest U.S. IPO of the year, with the stock rising 3.6% on the first day.

Investors’ appetite for smaller companies has also grown. Since the end of June, the Russell 2000 index of smaller companies has outperformed the S&P 500 by more than 5 percentage points. Since the majority of IPOs are for relatively small companies—under $5 billion in value at the time of their offerings—the recent gains for this group is encouraging.

Still, companies that recently went public haven’t been faring well: A majority that made their debuts in the past 2½ years are trading below their IPO prices.

Write to Corrie Driebusch at corrie.driebusch@wsj.com