A new survey has revealed that only 15% of 1,550 entrepreneurs questioned by capital market company Techstars plan to make an initial public offering (IPO) as a long-term goal.
The IPO market did a roaring trade in 2021 with 1,035 individual IPOs raising proceeds of up to US$346 billion, however, cooled considerably in 2022 as inflation soared and interest rates jumped in response, introducing a bearish mood to the market and causing many companies to delay listing to the market.
In the two and a half years since, the only tech company IPO to generate any real talk was Reddit, which IPO’d at US$34 a share and has since climbed to US$63.89, with a market capitalisation of US$10.447 billion.
IPOs may rebuild momentum soon
“In combination with the lack of confidence that IPOs will bounce back in short order, this year’s data further underlines the trend that startups are staying private for longer and IPOs are out of favour with the vast majority of early-stage entrepreneurs,” Techstars said in its report.
Of those surveyed, 34% preferred to be acquired by a publicly traded company over listing themselves and 30% said they intended to remain private or independent.
On the other hand, investment banks seem to think the time is right for an IPO resurgence, with Colin Stewart, the global head of Technology Equity Capital Markets at Morgan Stanley (NYSE:MS) telling CNBC in April that the “the IPO market’s back”.
Other analysts agree the time may be ripe for a resurgence in the US IPO market.
“The biggest trend we’re seeing in the US IPO market right now is more mature companies seeking to go public,” New York-based securities law firm Sichenzia Ross Ference Carmel founding partner Gregory Sichenzia wrote.
“Reddit, a brand that has been around forever and rumoured to go public several times, is a prime example.
“Another is Amer Sports, which makes Wilson tennis rackets and is targeting a valuation of up to US$8.7 billion for its US initial public offering.
“Many people, including me, believe this deal will be a bellwether event for the IPO market, and that if successful, we may see a cascade of offerings quickly follow.
“...the US economy’s ability to not just avoid recession but to actually grow is resulting in international companies seeking exposure to US capital markets.
“I predict we’ll see a number of companies quietly test the waters these next couple months, and that Q2 will be when we really see filings and listings pick up.”