Trends show that some of the best companies in the world enter the stock market after a major recession, and we saw that during 2020. The period from the summer of 2020 to the winter of 2021 marked the greatest IPO market in history, with companies like DoorDash, Coinbase, Snowflake, and many more entering the market at what seemed like a great time. Fast forward to the present, and we are currently in one of the worst IPO periods in history just a year later.
IPOs have raised only $5.1 billion this year, compared to the average of $33 billion and last year’s total of $100 billion at this time. According to Dealogic, this could be the worst year for IPOs since data started being tracked in 1995 as economists don’t expect it to open up by the end of the year, which would mark a crazy turn of events. Due to a multitude of factors that include inflation and interest rates, private companies are holding back from going public, and as a result they have had to adjust their business and plans to accommodate for the unexpected change.
Instacart is an example of a company who has been able to adapt well despite all the changes. They executed cost-cutting measures that allowed them to be profitable this quarter, and they reported record revenue to go along with it. On the other hand, companies like Klarna had to lay off workers and cut their valuation by 85 percent, showing how lofty tech valuations were in 2021. For now, some private businesses are surviving off the cash they raised in the last year, but things will have to change soon before some tough business decisions need to be made.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.