After a long drought for initial public offerings (IPOs), the market has reopened somewhat. But while there are hundreds of $1bn+ “unicorn” companies on the sidelines, we don’t expect go-go conditions.
- With a successful new tech offering this week, public markets have unofficially reopened to new issues. We do not expect another IPO boom. Instead, we should see a more measured pace of new issues with a bias towards quality and profitable firms that do choose to go public.
- High-profile listings this year will likely set the tone for the 2024 IPO pipeline. Among US deals raising over $300 million tracked by Bloomberg, new listings are up 21% on average since their debuts this year. This is an encouraging first step for IPO hopefuls. However, our analysis of historical IPO performance shows that performance tends to lag over a 1-2 year horizon. Given this mixed history, we are unlikely to see a true wave of IPOs until the highest profile unicorns choose to take the plunge into the public spotlight.
- As of July 28, there were an estimated 726 “unicorn” companies in the U.S, defined as privately-held startup companies that achieve a $1 billion post-money valuation in a private round of financing. Pitchbook estimates that the current backlog of companies that should have exited via IPO during the IPO drought of the last 18 months is approximately 220. As of this week, only two US unicorns have filed an S-1 to go public.
- The current slate of pending IPOs has the potential to provide a bit of momentum to a tech universe that has been relatively starved of good news beyond the biggest public stocks. Among late-stage IPO hopefuls are firms engaged in fintech and payments infrastructure, cyber security, aerospace, artificial intelligence, internet retail, logistics, marketing and education technology.