Following the high number of IPOs in 2021, broader market and economic uncertainty led to a pause in tech IPOs in 2022.
It’s not just people out on the streets who feel the cold of winter. Tech startups and investment bankers alike are eagerly awaiting the end of the long IPO winter.
According to Ernst & Young (EY), global IPO volume hit a record high in 2021, but will drop 61% in 2022 to $179.5 billion (approximately 23.35 trillion yen, at an exchange rate of 130 yen to the dollar). ). In 2022, there will be no mega listings like Rivian Automotive, which went public at $11.9 billion in November 2021 (approximately 1.35 trillion yen at that time), and the average deal size in the market has decreased. .
2022 will be the longest year without a big IPO, longer than after the financial crisis or the dot-com bubble, according to Morgan Stanley.
According to five investors, bankers and tech market experts interviewed by Insider, many companies that were considering going public are now pausing their IPO activity due to declining valuations. It is said that there is
“It’s really hard to tell employees, ‘Hey, your stock options are going down to XX because they’re going down in value,'” one tech market insider told Insider.
Consumer and Web3 companies in particular have struggled to raise venture capital (VC) funding. As capital needs and employee pressure mount, some of these companies are starting to look to mergers and acquisitions as they see “a reasonably good deal,” he said.
Venture investors are also shying away from going public for fear of massive losses, said Matt McIlwain, managing director of Madrona Venture Group in Seattle. It is said that it is recommended to
“Their cap table has investors who bought the stock when the valuation was very high, so I doubt anyone would go public with a down-round funding. (Makilwain)
2022 wasn’t a bad year for the tech IPO market. In October of the same year, Mobileye, a self-driving technology company, went public, according to Reuters. That was a far cry from the $50 billion expected months before the IPO, but it was valued at $17 billion and more than 37% higher at the time of its public offering. recorded a stock price rise.
Some expected Mobileye’s IPO to lead to a dramatic increase in public offerings. However, such a development did not occur.
Another person familiar with the tech market said that some companies that had secretly applied to list with the SEC went through the full IPO process to avoid continuing to pay high legal fees. Some are even thinking about stopping.
And with startups and IPO advisors keeping an eye out for future interest rate hikes, we don’t expect a resurgence of IPO activity until 2024. That’s why many tech companies are being advised to stick to a wait-and-see approach, tech market insiders tell Insider.
Some say it could pave the way for an IPO for the most promising companies once the market volatility settles and analysts raise earnings forecasts.
Kirk Kaludis, international head of technology investment banking at RBC Capital Markets, said, “It won’t be the first half of 2023, but the second half of 2023 that we’ll start to feel like the situation has reversed. Okay,” he says.
McIlwain predicts companies seeking to go public may prefer a direct listing, which does not increase the issuance of shares and therefore dilute existing shareholders’ shares.
“High-profile companies like Databricks may want to go public because it gives them a lot more flexibility,” McIlwain said.
Tech market experts look at five companies that could end the IPO winter (according to PitchBook for their total funding).
1. Databricks
Databricks CEO Ali Ghodsi.
Cumulative procurement amount:3.5 billion dollars (about 457 billion yen)
Earnings:non-disclosure
Business content:Databricks is a cloud-based data engineering tool used to process and transform large amounts of data and examine it with machine learning models. Customers include Adobe, Burberry, the National Basketball Association (NBA), and the National Aeronautics and Space Administration (NASA).
Why the IPO winter could end:CEO Ali Godsi has been talking about going public for years. We missed our chance in 2021, but we may finally get our chance in the second half of 2023.
2. Instacart
Instacart CEO Fidji Simo.
Cumulative procurement amount:2.7 billion dollars (about 350 billion yen)
Earnings:$1.8 billion by 2021 (approximately ¥234 billion)
Business content:Food delivery business
Why the IPO winter could end:Instacart announced it had filed confidential documents for an IPO in May 2022, but that plan was shelved when the market deteriorated. The company recently cut its internal valuation for the fourth time to $10 billion in 2022, The Information reported, citing two unnamed sources. there is However, Instacart is expected to go public if the market improves.
3. Netskope
Netscope founder and CEO Sanjay Beri.
Cumulative procurement amount: 1.04 billion dollars (about 136 billion yen)
Earnings:non-disclosure
Business content:Cybersecurity startup Netscope offers a cloud security platform with real-time transparency that protects businesses from threats and protects data.
Why the IPO winter could end:In July 2021, Netscope closed a $300 million Series H round at a valuation of $7.5 billion. Netscope co-founder and CEO Sanjay Berri told TechCrunch that the company is unlikely to raise another private round and that “a public offering is the way forward for us.”
“That day may come,” said one person familiar with the tech market. With a strong customer base of more than 2,000 companies worldwide, including more than 25 of the Fortune 100 companies, Netscope has so far avoided the kind of job cuts that have plagued other tech companies, at least publicly. rice field. And as other tech companies cut jobs in 2022, Netscope has stepped up its M&A efforts, acquiring cybersecurity startup Infiot in August 2022.
The person also said that Netscope’s focus on cybersecurity is shielding it from a broader wave of cost cutting. Even in tough times, a strong security posture is critical to a strong company and remains high on the priorities of customers’ chief information officers. As a result, the company’s future performance can be expected, and it can be an attractive company that can end the IPO hiatus.
4. Stripe
Stripe co-founder and CEO Patrick Collison.
Cumulative procurement amount:2.23 billion dollars (about 290 billion yen)
Earnings:Total global sales are not disclosed, but according to Independent.ie, sales at the Dublin headquarters division, which covers sales in Europe, the Middle East, Africa and Asia, will increase to 13% in 2021. From $158 million (approximately 177 billion yen) to $2.255 billion (approximately 293 billion yen), the global payment processing value in 2021 reached $640 billion (approximately 83 trillion yen).
Business content:Payments startup Stripe provides tools that make it easier for businesses to process payments, automate revenue collection and financial reporting, and enable them to embed financial services such as business finance into their products.
Why the IPO winter could end:IPO rumors have swirled around Stripe since mid-2021, when Reuters reported that Stripe hired IPO legal counsel and was considering going public through a direct listing because it doesn’t need to raise capital.
But since then, Stripe’s rock-solid cash situation appears to have slowed. In November 2022, the company cut 14% of its workforce, citing rising operating costs and weak consumer confidence. The company still has “plenty of capital,” but may be looking to secure liquidity soon, said one person familiar with the tech market.
Additionally, Stripe appears to be feeling pressure to go public from early hires whose stock options expire in 2023, The Information reports.
Stripe’s IPO is backed by an undisclosed valuation of $74 billion. This is a slight drop from its previous valuation of around $100 billion (approximately ¥13 trillion), but it remains an outstanding figure and could be the first large PO in a long time for the market.
A spokesperson for Stripe quoted co-founder John Collison as saying on CNBC that the company is “very happy” to be a private company.
5. TripActions
Ariel Cohen, co-founder and CEO of TripActions.
Cumulative procurement amount: 2.3 billion dollars (about 300 billion yen)
Earnings:Although it is private, founder and CEO Ariel Cohen said in an interview with Insider in May 2022 that the company was on track to more than triple its 2021 sales.
Business content:Help companies manage employee travel, company cards, and expenses. Customers include Lyft, Shopify, Unilever, Adobe, Netflix, Rivian, Thomson Reuters, Heineken, Notion, Canva, Carta Holdings (Carta), Loom, Databricks, and Patreon are just some of the names.
Why the IPO winter could end:Insider reported in September 2022 that TripActions had filed classified documents for an initial public offering, targeting a valuation of $12 billion in the second quarter of 2023.
The company has what investors want: solid unit economics and earnings growth potential, not growth at all costs. So now that business travel is starting to resume, the company appears to be well-positioned to end the IPO winter.
[original text]
(Edited by Sayuri Daimon)
Source: BusinessInsider
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