After all the years of not going public, 2020 is a little different. It feels like more companies are submitting and more companies are seeing their debut. We even see direct listings and SPAC-led deals, as well as a variety of traditional IPOs.
Data show how we assess this year's IPO market. Remarkably, the year didn't start too hot.
According to PwC, there were numerous IPO results for 2020 in the third quarter, with the quarter’s IPO balance setting a record in terms of IPO volume and dollars raised since at least early 2016. But with the third quarter in mind, 2020 will be a good year for tech debuts, at least compared to recent history.
Why? That's a good question. A theinformationsuperhighway reader analyzed the root IPO filing this morning and asked why we are seeing so many IPOs after being out of fashion for so long. Why are so many companies trying to get so hot after a decade of staying private?
I think there are several reasons. Here are some good ones:
- In today's marketplace, public ratings regularly exceed private ratings. This was recently told me by a startup manager, and I wholeheartedly agreed. For example, one only needs to look at Snowflake's IPO to understand this dynamic. Or the recent JFrog debut. Or how investors originally reacted to Lemonade's IPO. You have the idea. Public investors, and their private investors in particular, are content to increase the value of unicorns for future growth. Similar to what private investors have long done.
- This means that if you ever need to go public, it is a good time to go, as public stocks hit near all-time highs. If you are a company that will go public for the next several years, why not now when there is evidence of a demand for growth stocks and you can probably defend your valuation? It just makes sense!
- Add to this the sheer number of private companies that are old as hell and have to get the frack out of the private sandpit. If you're a company that really needs to go public like Airbnb (for technical reasons related to expiring options), now is great and now is good because tomorrow may be worse.
- And good news, there are so many ways to go public right now! After all, there are tons of options available to companies looking to build a list. You don't want to get a price through a traditional IPO? Do not worry. How about a direct listing? Don't you want that or a traditional IPO? Do not worry. How about one of around a dozen SPACs looking for companies to go public?
You have to make hay while the sun is shining, and since the Nasdaq is still above 11,000 and rumor has it that there will ever be more government relief to keep the markets high, it's a good time to list this. Hence the wave.
In conclusion, it should be noted that the 2020 average pace of Unicorn IPOs is nowhere near enough to clear the roles. As soon as the public market inevitably turns, many unicorns will be in their pen.
This will likely appear on the podcast soon. So make sure you are hired.