Silicon Valley’s biggest private tech companies are considering going public, following the upcoming initial public offering (IPO) of chip designer Arm. Instacart, Databricks, and Socure are among the potential candidates to launch their IPOs by next year. Arm’s IPO, set to take place next month, will serve as a test of investor sentiment. Arm was previously public for 18 years before being acquired by SoftBank and taken private in 2016. The successful return of Arm to the public market is expected to pave the way for other start-ups.
The IPO market for tech companies has been relatively quiet for the past 18 months, with many well-funded start-ups, such as Stripe, delaying their plans due to market volatility. Instacart, which saw its valuation drop from $39 billion to $12 billion earlier this year, may be one of the first to go public before the end of 2022. The decision will depend on the stability of public markets later this year.
Nasdaq, where Arm plans to list, has recovered most of last year’s losses, giving hope to start-ups that postponed their IPO plans in 2021. Venture firms are anticipating an IPO window to open later this year, providing an opportunity for strong companies to go public. Databricks, a software company that recently posted revenues of over $1 billion and made an acquisition, is also a potential IPO candidate.
As private investors have become more cautious, there is increased urgency for start-ups to access the public market. US venture capital fundraising and venture-backed exits both experienced significant decreases in the first half of 2022. ID verification company Socure, valued at $4.5 billion, has indicated plans for an IPO in 2021 but had to delay due to market conditions. It has since secured a $95 million credit facility and is preparing for an IPO in the coming year.
Investors are closely watching companies such as Reddit, Discord, and Navan, which initially planned IPOs in 2021 or 2022 but had to postpone due to market turmoil. Car rental app Turo and data automation firm Klaviyo have also shown signs of reviving their IPO plans. Elon Musk’s SpaceX, one of the world’s most highly valued private companies, has not disclosed any plans for an IPO.
The weeks following Labor Day will likely see a flurry of IPO activity, with companies needing to file paperwork this month. However, Stripe, despite longstanding rumors about an IPO, has no plans to go public this year. The payments company raised $6.5 billion in a private stock sale earlier this year and sees no immediate need to test the public markets.
Sources: Financial Times