The market for US VC-backed tech IPOs has been “dormant” in H1 2023, but there are reasons to be optimistic we’ll get a good crop of public offerings later in this year. According to a report by Silicon Valley Bank, ten IPOs in back-half of 2023 from venture-backed firms are expected as “forward revenue multiples align with long-term averages and pent-up demand builds from institutional investors”. Complementary research from Comcast Ventures’ Forecasts Labs state some unicorns are ready to go public, and will have the choice of or momentum toward IPO if healthy SaaS, revenue growth and maintaining their competitive edge continues.
When we do get the IPO train back on the rails, it is expected to be a relatively good run of public-market debuts. As well as those IPOs from US venture-backed and unicorn offerings, China, as reported in TechCrunch earlier this week, expects to have 30 of its unicorn startups IPO by 2020. On that note, it has also been reported that talks surrounding the $1 billion IPO of Chinese property portal Zhonghong Holding Co. have resumed after a pull-back amid falling markets.
Another beneficial factor for IPOs could be the outcome of the interest rate rise decision. Positive outcomes are anticipated for companies that could soon potentially benefit from a hike, such as bond insurers. However, Kurt Wagner states that while it may “seem odd for an article on IPOs to talk about interest rates”, it is a timely discussion alongside Chinese market turmoil and its potential impact on the US markets. By interest rates increasing, there is bound to be a decrease of capital available, which may lead to higher borrowing costs and pressure on stocks. Companies who already have IPO filings underway could be some of the first to be hit by any market turmoil, making the timing of their flotations more challenging. Other significant IPO markets are also in question, Wagner added. Historically the industry has relied on the performance of Alibaba, Facebook and Amazon, among others, drawing attention to doubts raised earlier in the week regarding Twitter and LinkedIn’s earning projections.
It’s inevitably momentary news that the first few months of the year have been a goose egg so far in 2016. However, as is normal with the IPO marketplace, there always seems to be hope for the forthcoming months, which The Wall Street Journal reports is very much the case for 2Q 2016. The Securities and Exchange Commission has reportedly granted 44 IPOs clearance since the start of the year and several issuers are planning on pricing later this week, which also adds to the hope that the market is well on its way to recovery.