The IPO market has been quiet so far this year, leaving many investors and journalists alike eager for some exciting public offerings. However, there are reasons for optimism that we may see a strong lineup of IPOs in the coming quarters.
Why Has the IPO Market Been Quiet?
According to research from Silicon Valley Bank, the US market for VC-backed tech IPOs is expected to remain dormant in H1 2023. The lack of IPOs is likely due to a combination of factors, including uncertainty around interest rates and forward revenue multiples.
However, the same research suggests that the market may pick up in the back half of the year, with no fewer than ten IPOs expected from venture-backed companies. While this may seem optimistic, we have reason to believe that it could come to fruition.
Why Things May Be Looking Up
Recently, TechCrunch+ spoke with Arjun Kapur, a managing partner and founder at Forecast Labs, who shed some light on the IPO question.
Kapur explained that while the market has been quiet, there is a lot of pent-up demand from institutional investors for new IPOs. Additionally, he noted that companies are beginning to think about going public again and are likely to do so in the coming quarters as long as market conditions remain favorable.
So why have conditions been favorable? Firstly, we are starting to see some easing of interest rates and forward revenue multiples aligning with long-term averages. Additionally, unicorns have been performing well in the secondary market, indicating that there is investor appetite for new IPOs.
What Does This Mean for Investors?
For investors, the potential influx of new IPOs is an exciting prospect. The lack of IPO activity so far this year may have been disheartening, but the promise of a strong lineup in the second half of 2023 should give investors reason to be optimistic.
However, it’s important to note that investing in IPOs carries inherent risks, and it’s crucial to do your due diligence before investing in any company going public. Additionally, investors should be prepared for the possibility of volatility in the public markets as new companies go through the initial stages of being publicly traded.
Conclusion: Brighter Days Ahead?
While 2023 may have started off slow for the IPO market, there are reasons to believe that things may be picking up in the coming quarters. As long as market conditions remain favorable, we could see a strong lineup of IPOs from venture-backed companies in the back half of the year.
Of course, only time will tell what the future holds for the IPO market. But with optimism starting to emerge and investors eager for new opportunities, it’s fair to say that the future looks brighter than it did just a few months ago.
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