Turo, a car-sharing service, made the notification. IPO prospectus A month earlier, Reddit said draft registration for public offering.Instacart confidential documents It has been submitted in May of last year.
None are on the market yet.
apart from, bloated pipeline The IPO drought continues, even as the number of companies waiting to list and a recovery in tech stocks pushed the Nasdaq up 30% in the first half of 2023. There have been no notable venture-backed tech IPOs in the US since December 2021. Hashi Corporation debuted on the Nasdaq.
Only 10 companies across all industries raised more than $100 million in new U.S. equity sales in the first half of the year, according to FactSet. In the same period in 2021, there were 517 such deals, notably $1 billion or more IPOs by companies including dating sites. bumbleOnline Financial Providers agree withand software developers UiPath and sentinel one.
As the second half of 2023 begins, investors and bankers aren’t expecting too much of a champagne burst for the rest of the year.
Many once domineering companies are still clinging to their old reputations, unable to come to terms with the new reality after a harsh 2022. Moreover, slowing economic growth has made it especially difficult as businesses and consumers are cutting costs and delaying software purchases. Allows companies to comfortably forecast the next few quarters. Wall Street likes predictability.
If you’ve been waiting for a splashy debut from design software maker Canva, check out the ticket site. stub hub Or wait with data management company Databricks.
“There’s a disconnect between 2021 valuations and current valuations, and it’s a tough pill to swallow,” said Lise Byer, founder of Class V Group, an IPO consultancy in Portola Valley, California. “After a period of complete radio silence, activity will pick up gradually, but that doesn’t mean companies are going out of the competition.”
The open market tells an uneven story. This year’s rally has brought the Nasdaq index within 15% of its record since late 2021, but the Cloud stock index is still down about 50%.
There have been some signs of optimism for the Mediterranean restaurant chain this month Cava Listed on the New York Stock Exchange. Shares more than doubled on the first day of trading, indicating strong demand from retail investors. Buyers noted that financial institutions were also enthusiastic about the deal.
Last Friday, Israeli beauty and technology company Odditi, which operates the Ill Maquillage and Spoiled Child brands, applied to list on the Nasdaq.
It all comes after a successful month of secondary offerings. A surge in follow-on trading made May the month with the most sales of public shares since November 2021, according to Goldman Sachs data.
Apple and Nvidia perform well
Investors are hungry for new names, but they are much more discerning when it comes to technology than they were at the end of a decade-long bull market.
large cap apple and Nvidia has risen sharply this year, returning to trading near all-time highs, boosting the Nasdaq due to its weight in the index. But the progress has not been evenly spread across the industry.
In particular, investors betting on less mature companies are still being hit. The seven biggest tech IPOs in the US in 2021 have lost at least 40% of their value since their debut. coin basewent public through a direct listing, but fell more than 80%.
That year’s IPO class included high-growth companies with even higher cash burns, and the equation suggests that recession fears and rising interest rates will help investors find more favorable assets to withstand the economic slowdown and rising cost of capital. It worked fine until I started investing in
Employees of Coinbase Global, the largest U.S. cryptocurrency exchange, watch their listed products appear on the Jumbotron of the Nasdaq market site in Times Square, New York, April 14, 2021.
Shannon Stapleton Reuters
Bankers and investors told CNBC that despite growing optimism, continued economic concerns and soaring valuations ahead of 2022 set the stage for a quiet second half for tech IPOs. rice field.
One additional challenge is the return of fixed income alternatives. After a long run of near-zero rates, the Fed this year raised its target rate to between 5% and 5.25%. By depositing funds in Treasury bills, certificates of deposit, and high-yield savings products, we are now earning annual returns of 5% or more.
“Interest rates not only drive the cost of funding, but it is also important to let investors trade 5% risk-free returns,” said Jake Dollarhyde, CEO of Longbow Asset Management. rice field. “You can make 15-20% gains in the stock market, but you can also take 15-20% losses,” he said.
Dollarhyde has invested in breakthrough technology products such as: Google and Facebook, says an IPO is important. These provide more opportunities for asset managers and benefit the technology ecosystem that helps fund the next generation of innovative companies.
But he also understands why he’s skeptical about reopening windows. Perhaps the biggest recent failure in technology investment followed the boom in special purpose acquisition companies (SPACs), which brought a number of young companies public through reverse mergers.
name like open door, clover health, 23 and me and desktop metal It has lost over 80% of its value since it came to market via SPAC.
“The stench of failure from the 2021 SPAC boom seems to have dampened investor appetite for an IPO,” said Dollarhyde. “I think this has done some damage to the traditional IPO market.”
The private market is also affected. Venture funding slowed significantly last year from record levels and has remained relatively subdued outside of the hot spot of artificial intelligence.Companies are being forced to cut jobs and close offices to save cash and right-size their operations.
Pre-IPO companies such as Stripe, Canva and Klarna have seen their valuations hit hard by internal actions or price cuts from outside investors.
waiting game
Few companies have been hit as hard as Instacart. The company has slashed its valuation from a peak of $39 billion to a minimum of $10 billion by the end of 2022. Last year, the company secretly filed for an IPO, but has not filed publicly yet and has no plans to do so anytime soon.
Similarly, Reddit announced in December 2021 that it had confidentially submitted a draft registration statement for publication. That was before the online ad market crashed, with Facebook suffering three straight quarters of declining revenue and Google’s ad revenue declining.
Reddit is currently in the midst of a shift in its business model to focus more on revenue from third-party developers using its data than advertising. But the change sparked widespread protests in Reddit’s most popular community this month, leaving the company with a lot of work to do before it goes on sale to the public.
A Reddit spokeswoman declined to comment.
Turo was so close to its IPO that it went beyond confidential filing to publicize a full S-1 registration statement in January 2022. The public offering has been postponed indefinitely as the shares have been sold. The company needs to keep updating its quarterly results to avoid the withdrawal of the application.
Like Instacart, Turo operates in the sharing economy, which was a dark side for investors last year. Airbnb, uber and door dash All recovered in 2023, but also implemented significant staff reductions. Turo has gone in the opposite direction, with 429 full-time employees at the time of its first IPO filing in 2021, but full-time employees more than doubled to 868 at the end of March, reports say. according to, Latest application.company reportedly The company laid off about 30% of its workforce in 2020 during the coronavirus pandemic.
Turo and Instacart could go public by the end of the year if market conditions continue to improve, said a person familiar with the companies, who requested anonymity because they are not authorized to speak publicly about the matter.
Byron Dieter, a cloud software investor at Bessemer Venture Partners, expects no significant activity this year, and the next company to debut may have to wait until the first quarter of 2024 to report its earnings. says it’s expensive.
“Companies that were registered a little over a year ago or were considering withdrawing have withdrawn and stopped renewing, and overwhelmingly have no plans to re-register this calendar year,” Dieter said. . Twilio and Hashi Corporation. Dieter said there was “10 months left until real activity resumes”, adding that uncertainty over next year’s presidential election could lead to further delays.
In the absence of an IPO, startups must consider the fate of their employees. Many of our employees have large amounts of net worth tied to their company stock and have been waiting for years for an opportunity to sell some of it.
stripe dealt with the problem In March, it said investors would buy $6.5 billion worth of employee stock. The move lowered the valuation of the payments company from its all-time high of $95 billion to about $50 billion. Dieter said many late-stage companies are considering similar deals, which typically involve allowing employees to sell about 20% of their vested shares.
He said his mailbox is filled daily with brokers trying to “steal small blocks of stock” from employees of late-stage startups.
“The Stripe problem is real, and so is the liquidity problem in general,” Dieter said. “Employees are working to find avenues for some liquidity. With the public market still largely closed, they are looking for alternatives.”
G-Squared is one of the venture companies that actively buys employee shares. Company founder Larry Ashbrook said about 60% of G-Squared’s capital was put into secondary purchases, helping the company provide some liquidity to its employees.
Ashbrook said in an interview that trading began to recover in the second quarter of last year and continued to climb to levels that are “now overwhelming.” As companies and their employees have become more realistic about the market reset, a significant portion of the stock has become available for purchase at prices 50% to 70% below the valuation of the 2021 funding round, he said. .
Ashbrook said he couldn’t name recent purchases of private company stock because of confidentiality agreements, but said his company had previously purchased secondary stock before an IPO. Pinterest, Coursera, spotify and Airbnb.
“Releasing pressure is sorely needed right now,” Ashbrook said. “We are helping companies extend the lifecycle of their private life and solve the problems that come with keeping it private.”
clock: Private market index rises for first time in two years