"tech IPO window is open, but not wide open"23 Sep 2023 19:32
I just read a very interesting FT View article in this weekend's FT.
I don't have access to the online version - so here is some of that article from the print edition.
"For nearly two years, there were no big technology IPOs/ The, suddenly, three came along at once. In the past two weeks, the successful offerings of Arm... Instacart... and Klaviyo... have all followed a broadly similar arc.... Together they provide evidence that, after slamming shut following a record-breaking 2021 as inflation and interest rates rose, the "IPO window" for tech and other companies to come to the public markets is open again, but it is not wide open......
This is no return to 2021, when valuations soared to dizzying levels, and many investors were burnt. Goldman Sachs has found the 2020-21 IPO wave had an "abysmal performance relative to history", the median offering lagging behind the broad US market by 48 percentage points in the following 12 months. Investors today want profits and positive cash flow, not just future growth prospects.
Where does that leave the horde of VC-backed tech and other start-ups, which have been starved of fresh funding during the downturn and waiting for market appetite to return so they could raise money? Some like Instacart with particular needs (the grocery delivery group had to find $500mn to pay tax linked to employee stock compensation) will opt to accept a "down round" IPO, involving a cut on previous private valuations. And where private backers put in much of their cash in earlier funding rounds, they may still be able to sell at a decent premium.....
This will at least allow private tech valuations, which have been in something of a hazy netherworld, to be "marked to reality". VC investors selling existing holdings frees up capital to plough into new ventures. The years of cheap money and plentiful private funding, moreover, heightened the tendency for start-ups to remain in private hands for longer. Moving them on to public markets exposes them to greater scrutiny and allows retail investors to share in the potential value creation.
Public equity markets are the life-blood of capitalism, and dynamic growth companies should be the life-blood of public markets. If that cycle is starting up again, with more realism among investors, that is all to the good."
I'd be interested to hear any responses to that article from people on here.
From what I gather (from reading it), a more realistic and healthier climate is developing for the kind of tech and "dynamic growth companies" that GROW funds and supports. That seems to me to augur well for GROW's prospects.
Any opinions welcome!
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