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The IPO market has crashed this year


New York
CNN Business

Wall Street bulls may have come back strong in October as bears appear to have entered hibernation. But there’s another, albeit mythical, beast that’s been virtually absent from the stock market all year: unicorns. There has been little demand for private companies to debut initial public offerings.

Only two companies went public last month. According to data from IPO research firm Renaissance Capital, October was the slowest month for the IPO market since 2011. Additionally, only 66 companies went public so far. present this year, down more than 80% compared to a year ago.

Several high-profile unicorns — the nickname given to startups valued at $1 billion or more based on their last funding round — have reportedly pushed back on plans to go public this year. Many hope to do so in 2023 instead if the broader market improves.

This list would include grocery service Instacart, social media site Reddit and fintech giant Stripe.

Demand for companies going public through mergers with special purpose acquisition companies, or SPACs, has also imploded. So far this year, only 82 companies have gone public through a SPAC agreement, according to SPAC Research. That’s down from 613 in 2021.

Problems in the SPAC market are more concerning because when a blank check company goes public, it usually has about 18-24 months to find a company to merge with before it is legally obligated to liquidate and return money to investors.

SPAC leader Chamath Palihapitiya was forced to shut down several of his blank check companies. Legendary investors Sam Zell and Bill Ackman also dropped out of SPACs this year after failing to identify a viable startup to acquire.

Still, there is hope that the traditional IPO market is slowly recovering.

One of the two companies that went public in October was Mobileye, a self-driving car company that was owned by chip giant Intel (INTC). Demand was strong for Mobileye shares. The shares were priced above their bid range and jumped almost 40% on the first day of trading.

This shows that there is still investor demand for companies that are in dynamic and rapidly growing markets. With that in mind, other unicorns could go public in 2023 if the IPO window opens again.

Crypto kingpin FTX, sporting goods leader Fanatics, Fortnite owner Epic Games and mobile banking app Chime are among the top candidates for an IPO in 2023, according to Wall Street analysts.

But IPOs of the planet’s two most valuable startups seem less likely.

TikTok owner ByteDance could be worth $140 billion, according to research firm CB Insights, but a stock market listing (at least in the US) is unlikely to happen anytime soon given the economic tension between the Biden administration and China regarding export restrictions for US products. semiconductors. Chinese companies can choose to list in Hong Kong or Shanghai instead of New York.

Listed Chinese companies have also come under increased scrutiny from US regulators this year. The SEC investigated the IPO of Chinese app Didi, for example.

And then there’s SpaceX. The space exploration company run by Elon Musk is worth $127 billion, according to CB Insights. But Musk has all but ruled out a company-wide IPO.

The CEO of Tesla (TSLA) and new owner of Twitter, however, has reportedly suggested that an IPO of SpaceX’s Starlink satellite internet business could take place… but not before 2025 at the earliest.

So investors hungry for another mega unicorn like Uber (UBER), electric truck maker Rivian or Airbnb to go public anytime soon may have to wait a while.

cnn World Gt

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