Current IPO Crop

It is the season of mega tech IPOs including the recent offerings by Pinterest and the upcoming one by Uber. A key question to be answered is how well will these companies perform in the public markets over time? So far Pinterest has traded up nicely in the first few days, but I am asking about long term performance. We are in new territory here because of how much money these companies have been able to raise previously in private markets.

To unpack the question and its implications further: will most of the gains in these investments be among the private investors who invested early or will there still be meaningful returns in the public markets? We will only know the answer to this in a year or so from now (and possibly not even then), but it will matter a lot for both future IPOs and for late stage financings.

Because so much private money has been available for such a long time, the sorting between companies that truly have sustainable long term growth and those that have bought their growth will happen in the public markets. My sense is that when some of these companies inevitably struggle, there will be a broad and indiscriminate sell off among tech stocks as a result with potentially the IPO window closing entirely. Anyone thinking of going public should probably do so sooner rather than later.

2020 will likely be a bumpy year as this sorting starts to take place. Plus there is the added complication of the ongoing tech backlash which has been building momentum for some time now. All of that is to say IPO buyer beware!