When a company decides to go public, it must follow a process that involves the involvement of investment banks. They help the company create an underwriting agreement that outlines how much money the firm will raise, the type of securities it will sell to the public and the price at which they will be sold.
IPOs are a great way for companies to raise capital and bring their products to the marketplace. However, they can also be a risky venture for investors. This is especially true in a weak market, where companies may not have the best track record for future growth.
Companies often defer their IPOs 2023 until the market improves and investor animal spirits are high. This is a strategy that has been used by several CNBC Disruptor 50 companies, including Chime, Databricks and Gopuff.
Stripe, which developed a payment processing service that allows online and mobile apps to integrate with one another, filed for an IPO last year but has yet to announce a specific date. It is a good bet that it will go ahead in 2023, though, as it has received significant VC funding and its position as the number one payments processor in the world should ensure its valuation remains strong even if e-commerce sales decline in the short term.
Electric-vehicle makers in Asia are rushing to capital markets to raise money, as they try to take advantage of a surge in demand for energy-efficient vehicles. Leapmotor and property-services firm Onewo, which both launched a few months ago, plunged on their first trading day and share prices are now well below their IPO values.
The IPO market is currently in its worst period since the 2008 financial crisis, but it may soon recover. The Federal Reserve is preparing to lift interest rates, and that has the potential to make public listings more attractive to private companies that are looking to preserve cash or extend their runways as the economy slows down.
These moves are unlikely to affect the overall IPO pipeline, but could put pressure on deals that have already been announced. The Fed’s stance is likely to affect discount rates, which are a key factor in determining a company’s worth when it goes public, says Bonnie Hyun, head of capital markets at the New York Stock Exchange.
Despite the poor IPO climate, many companies that have received significant VC funding are likely to go ahead with their offerings. For example, data-analytics company DiDi Group, which recently filed a flurry of documents to list in the US, has received significant backing from both traditional and private equity firms.
Meanwhile, chip designer Arm Holdings is ready to go public, a move that could allow the firm to become a $40 billion company. It is expected to raise $750 million at a $137 billion valuation in early 2023, according to CNBC.
Cava, a producer of dips and spreads that sells its products at Whole Foods, Safeway, MOM’s Organic Market and local independent markets, is planning to launch an IPO in the first half of 2023.