Recasts paragraph 1 to mention fully diluted valuation, adds analyst comments in paragraph 5

By Ateev Bhandari

May 13 (Reuters) - Digital health startup Hinge Health said on Tuesday it is targeting a valuation of up to $2.98 billion on a fully diluted basis in its initial public offering, signaling thawing of the U.S. IPO market after recent market volatility.

Financial markets have regained their footing in recent weeks as the de-escalation in U.S.-China trade tensions has rekindled expectations for a resurgence in dealmaking activity.

The San Francisco, California-based company, along with existing stockholders, plans to raise over $437 million by offering 13.7 million shares priced between $28 and $32 each.

Even at the top of its proposed range, Hinge Health's target represents a nearly 52% reduction from the $6.2 billion valuation it fetched in the 2021 Series E round, led by Coatue Management and Tiger Global.

"Investors do expect a healthy discount to peers. Companies are often advised to start low and build interest," said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs.

While a widely expected IPO market recovery is yet to materialize, defensive sectors like healthcare have been resilient, with healthcare companies accounting for 23% of all IPOs in the first quarter 2025, according to an Ernst & Young report.

Last week, Apollo-backed Aspen Insurance's AHL.N shares rose nearly 11% in its New York Stock Exchange debut, while virtual chronic care provider Omada filed to list on Nasdaq.

Founded in 2014 by Daniel Perez and Gabriel Mecklenburg, Hinge Health's platform leverages artificial intelligence to provide at-home musculoskeletal care, chronic pain management, and post-surgical rehabilitation.

Rising concerns over Americans' sedentary lifestyles and dietary choices have driven demand for improved healthcare options.

Hinge Health's revenue climbed to $123.8 million in the first quarter of 2025, a nearly 50% increase from the previous year. The company also reported a profit of $17 million compared to a loss of over $26 million in the previous year.

Morgan Stanley, Barclays Capital, and BofA Securities are the lead underwriters for the offering.

The company will list on the NYSE under the symbol "HNGE".

(Reporting by Ateev Bhandari in Bengaluru; Editing by Vijay Kishore, Tasim Zahid and Shailesh Kuber)

((Ateev.Bhandari@thomsonreuters.com;))