Despite recent successes, IPO market still won’t fully open until 2025 | TechCrunch

This year has already proven that startups are willing to go public in a less-than-ideal market — and get rewarded for it. But bankers, lawyers and investors said recent IPO successes aren’t enough to fuel more than a dozen tech IPOs this year.

“I don’t think the doors will be as open for us as I thought,” Greg Martin, co-founder and managing director of Rainmaker Securities, told TechCrunch. “The flow was delayed; I thought it would happen early in Q1. Because of this, I think the doors may not open until 2025, but we may have a healthy influx of 10 to 15 companies for the year.

It takes a few weeks or a month of trading for people to feel confident, regardless of how recent IPOs have performed so far, said Jeremy Glaser, an attorney and co-chair of Mintz’s venture capital and emerging companies practice. More data is needed.

Looking at how Clavio and Instacart are performing today shows why people remain cautious. Klaviyo currently trades at a $5.94 billion market cap, below its $9.2 billion IPO price. Instacart is performing better, but is still trading below its initial IPO price of $9.9 billion. Currently it is trading at $9.47 billion.

“I’ve been through a lot of IPO cycles, you really need an extended period where you’re seeing multiple IPOs staying above the IPO price,” Glaser said. “I don’t know if we’re there yet. We have some positive signs but we need more companies to remain above the IPO price for a long time.

Time is also a big factor here due to elections. If some companies had come out and made their public debuts early in the year – and if they had done well – it would have given other companies enough time and confidence to go through the full S-1 process before the election. But due to the timing of the recent IPO, companies will be short of time.

Martin said that despite the successes, he’s not sure it’s really a good market to go out in. Interest rates aren’t being cut the way many predicted and were expecting this year, and Martin isn’t sure the economy is completely in the clear yet after a 2022 bear market – Especially with the uncertainty about how the markets will react after the election in November.

“I still think the recession is not over yet,” Martin said. “We had, what, 1% growth in Q1? Mostly macroeconomic factors, it feels like the market is experiencing relative stability right now [are] Lots of things that can change this. I am hopeful [the market] remains constant. “I remain optimistic at this point.”

Glaser and Martin’s sentiments seem to echo what others in the market are saying. A top-tier venture fund recently told TechCrunch that it is advising all of its portfolio companies that could potentially IPO to wait until next year. Colin Stewart, Morgan Stanley’s global head of technology equity markets, recently told CNBC He believes 10 to 15 companies could go public this year – exactly in line with Martin’s prediction – and 2025 will be better.

Investors weren’t sure what to think About the upcoming IPO market in 2024. According to the TechCrunch survey, some thought activity would resume, while others thought it would be another quiet year. One thing they all seemed to agree on was that no increase in activity was likely until the second half of the year.

but then Astera Labs filed to go public in February, and reddit Followed shortly after. Ibotta The next one was in March, after that rubric Just a week later. Since then all four have floated and popped since their first day of trading. Although the respective stocks have since retreated, they are all currently trading above their IPO prices – which were priced above their initial target ranges.

Watching these four stocks successfully hit the market makes us wonder: Were investors wrong about the IPO comeback timeline? But based on the sentiments of people like Martin and Glaser, probably not.

This means VCs may have to wait another year to become a meaningful source of liquidity in the IPO market. However, plans to exit this year have not been completely stopped. Glaser said he is not working on IPOs, but his M&A practice has been the busiest he has been in a long time. This is good news for investors looking for returns this year.