2022 saw the worst IPO market in the last three decades, and 2023 has so far continued to disappoint. Let’s unpack how we got here, what the trends indicate for the rest of 2023, and what pre-IPO companies can do right now.
In 2022, several factors contributed to the collapse of the IPO market:
IPOs are sensitive to uncertainty, and 2022 brought heaps of that.
Among my IPO friends I’m seeing a broad range of opinions. Optimists are looking at positive indicators that predict the IPO market will be back as soon as summer of 2023 (normalizing inflation rates, restoration of supply chains, etc.) Others are more pessimistic and have already declared 2023 a lost year.
I suspect the truth lies somewhere in the middle: I wouldn’t count 2023 out, but a return of IPOs by this summer seems like an aggressive prediction. I imagine we’ll see things opening up by the back half of this year.
With everything so uncertain, it makes sense for some companies to hold off and make internal improvements to ensure a path to profitability when they do go public. When markets are hot, growth tends to be the main indicator investors look at, but investors in the current climate are understandably more interested in stability and demonstrating a path to profitability.
So, how can pre-IPO companies make the most of this time as they wait for the IPO markets to heat up? Not all moves are good at this stage. Becoming SOX compliant, for example, is a cumbersome process and doesn’t do you much good as a private company. But there are still ways to improve:
Use these delays to your advantage; don’t waste this time. So much of our financial landscape is cyclical, and we will cycle back towards a strong IPO market again. Until then, do what you can to be ready.
Partner at Deloitte
Listen to the entire podcast (E27: State of the IPO Market with Barrett Daniels) here:
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