Who Will Unfreeze the IPO Market?

It’s every founder and investor’s dream: ringing the bell at the NASDAQ on the day you go public. But in 2022, that dream has been elusive as tech IPOs have vanished.

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From a report out this weekend in the Financial Times:

The stock market downturn since the start of the year has caused the longest drought in US technology listings this century, with experts cautious about the pace of a revival even after tentative signs of life in other sectors.

Wednesday will mark 238 days without a tech IPO worth more than $50mn, surpassing the previous records set in the aftermath of the 2008 financial crisis and the early 2000s dotcom crash, according to research by Morgan Stanley’s technology equity capital markets team.

Startups are afraid to IPO in a down market. The NASDAQ has fallen 28% so far this year, and many tech stocks have fallen far more.

No startup wants its stock to get hammered like high profile IPOs Robinhood or Coinbase:

When you go public and your stock starts dropping like a stone, employees watch the price all day. This hurts morale, not to mention productivity.

In these turbulent times, startups are better off in the tranquil harbors of the private markets. There, valuations rarely change and companies can build outside the public eye.

Startups are able to stay private longer because many raised huge sums last year. Many late stage startups bagged $100 million or more from firms like Tiger Global.

That means they don’t need to go public to raise money. So, they can wait until the most opportune time to cash out.

If I were a shareholder of a late stage startup, I wouldn’t want them to go public any time soon. Why risk a black eye in the markets when you can wait it out?

Sooner or later, the IPO window will reopen. The most likely candidates to force it open are high profile startups like Stripe or Instacart.

Indeed, Instacart is working on an IPO and may list later this year. If that IPO is a success, you can bet there will be many more.

Until then, let’s bide our time and build!

When do you think the IPO window will reopen? Leave a comment at the bottom and let me know!

More on tech:

Midas Speaks: Sequoia’s Don Valentine at Stanford GSB

Why Drone Delivery Will Be an Awesome Business

Giving Investors What They Need to Say Yes

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Photo: “Yahoo! opens NASDAQ” by Yahoo Inc is licensed under CC BY 2.0.


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