Despite a rocky 2023 for companies going public, the Nasdaq is still on pace to lead new listings for the fifth straight year, according to Dealogic. University of Florida Finance Professor Jay Ritter joins Yahoo Finance's Rachelle Akuffo to discuss the IPO outlook for 2024.

When examining IPO potential, Ritter focuses on sales traction as a key factor. He notes companies with over $100 million in revenue perform better, on average, for investors versus those that have less than that, with bio-pharmaceutical start-ups being the "one exception."

Since 2021's boom, Ritter notes there's been "very little IPO activity" beyond small, micro-cap companies with "very little in the way of sales." But he believes in 2024, "we're going to be seeing more and more quality companies going public" as economic uncertainty clears.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: Well, it was largely a difficult year for 2023 public debuts, but there may be a silver lining come to 2024. New data from Dealogic says that for the fifth year in a row the NASDAQ is likely to supplant the New York Stock Exchange as the exchange to list on. IPOs listing on the NASDAQ were able to raise $13.6 billion compared to companies that listed on the NYSE, that were only able to raise $10.4 billion.

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Let's bring in Jay Ritter, University of Florida finance professor and IPO expert, to discuss this. Thank you for joining me in this morning. So when you're looking at what makes for a-- when we're looking at what makes for a quality IPO, what are some of the factors that you look at, including perhaps where they're listing?

JAY RITTER: OK. The main thing that I look at is sales. Does a company have demonstrated ability to sell goods or services to consumers or other companies? Historically, companies that go public with less than $100 million in sales have been disappointments to investors on average.

Those that have gone public when they're more mature have done well on average for investors. One exception, of course, is biopharmaceutical startups, almost all of which have no revenue from product sales. But even there, on average, they've been a bit of disappointment.

RACHELLE AKUFFO: So, Jay, how has the appetite changed? Obviously, when you think of the heydays of WeWork, when a lot of these banks and investors were throwing money, how mature is the market now, especially in the higher for longer interest rate environment?

JAY RITTER: Well, what we've seen, that the last two years, after the boom in 2021, is very little IPO activity, and quite a large proportion of the operating companies going public have been micro-cap stocks, the kind of companies with very little in the way of sales. Some of them have rocketed up on the first day of trading and then collapsed. Others have collapsed starting on the first day of trading.