When Snap went public in early March, it opened up the floodgates after what had been a stagnant period for tech IPOs. The warm investor reception for the Snapchat parent helped pave the way for MuleSoft, Alteryx, Elevate, Okta, Netshoes, Yext, Cloudera and Carvana, which all debuted in March or April.
But then in May we only had Appian. And June isn’t expected to be a strong month, either.
Considering the Nasdaq and S&P are at record highs and the latest batch of IPOs performed pretty well, every late-stage venture company that’s ready should be trying to go public right now. So where are they?
Experts say that more are coming, but it might not be the blockbuster year that some were hoping for.
“We will see a few, but I believe the predictions of a very robust first half of the year will prove to have been way too optimistic,” said Lise Buyer, an IPO consultant and partner at Class V Group. “The combination of plenty of cash in the bank and a disconnect between last year’s private and comparable public valuations will, in my opinion, keep the market plodding, but not galloping along.”
She’s referring to all the money thrown at “unicorns” over the past few years. While some investors have been more cautious over the last year or so, many of these late-stage startups still have enough runway to stay private for now.
Some companies are also dreading the possibility of a “down round IPO,” where there’s a disconnect between the public market cap and the pre-IPO valuation. Early investors and employees still make money in this scenario, but the investors and employees who came along later can get burned. The stigma of losing people’s money can be hard to recover from.
But others in the IPO community remain hopeful that 2017 will finish strong.
We talked all about this on TechCrunch’s “Equity” podcast this week (IPOs are a regular theme on the show). Rick Kline, a partner at Goodwin Procter, who has worked on recent IPOs including Okta and Snap, said that “there’s still a nice pipeline of companies that will come out.”
He said that part of the reason for the pause is that some of the upcoming IPOs weren’t expecting the window to open yet. “Anybody who saw the really good performance in Q1 or April wouldn’t be able to access the market in May,” because it takes a few months to get ready.
Kline said he expects a few in June and then “September, October is when you should look for the biggest bump in IPO activity.”
Bob McCooey, senior vice president of Nasdaq’s Listing Services, is also expecting the fall to be a great time. “This post-Labor Day to Thanksgiving window could be one of the busiest that I’ve seen in the decade that I’ve been here.” He said he’s been getting a “significant amount of inbound phone calls.”
He believes, “the window is now fully open.”