Editor’s Morning Note: The Wall Street Journal says that the “Anemic IPO Market Is Poised for a Rebound.” But what about tech?
If you have kept hope for a dramatic rebound in the pace of US-market technology IPOs, I am here to break your heart all over again.
The WSJ set the morning news cycle today with a piece arguing that after Labor Day a “flood of share debuts is expected to invigorate the listless IPO market.” Without any further consideration, that sounds positive. Liquidity isn’t frictive, after all.
A quick read of the piece indicates that we could see another technology IPO this year. Another one.
And it’s Nutanix, which is a disappointment, as we already knew that it was going to pull the trigger. Therefore, the article doesn’t bring much to the tech world aside from a reminder that things are looking up in other sectors.
I Fear Their Demand On My Supply1
If we are still only looking at the Nutanix and Trade Desk IPOs, why bring up the WSJ’s piece? I promise it has nothing to do with it being early on a Monday. Instead, the Journal’s report has a quote that you must read:
That paragraph, in retrospect, isn’t very surprising, especially given the results of the Twilio IPO. But it is notable in that it underscores a strength and a weakness.
The strength is the ability of many private companies to avoid going public. That constrains supply, as the quote reflects. If you can raise without the added work of being public, viva! And that, at least, has been the song of the mid ’10s.
However, we do not see an increased IPO cadence from late-stage technology companies as private money tightens. That implies a growing cash crunch, debt dive, or dramatic cost control group exercise.
I doubt that many unicorns can cut their way to profits at this point. Therefore, they will need more capital to see them through. And that means, sans late-stage infusions, damned public offerings.
Unless, of course, those companies are not ready for a public debut. Hence the name of this short section: I fear their demand on my supply. Thus spake the startup.
Keep in mind that 2016 US-market tech IPOs have done very well to date. They are not following in the footsteps of their 2015 predecessors.
That means that companies not going public at the moment are choosing to not do so when there is:
- Market demand for their shares;
- An open IPO window recently proven in their sector;
- Record market highs;
- Strong year-to-date results for similar offerings.
And yet, here we are, blogging again as a depressed, desultory duo wondering when it will stop raining. It’s enough to make you start caring about biotech.
- Never get high on your own supply? I could supply their demand with fear? I demand you fear my supply!