Possible Explanations For The IPO Market Slump
According to a startup CEO, venture capitalist, and a lawyer, Wall Street's expectations of a new wave of IPOs were diminished by pullbacks, multibillion-dollar devaluations, and a depleted desire for risk, according to Markets Insider.
This year's IPO class has been the least profitable since the tech bubble almost 2 decades ago. Turo is a car-sharing startup and CEO Andrew Haddad commented on the matter by saying, "I think the markets have been very unforgiving with the companies that are burning a lot of cash, and are not showing material changes in their profit margins."
Lonne Jaffe is the managing director of Insight Partners, a venture capital firm. "If you believed the market was going to give you incredibly cheap capital even through your story was messy, that was the window that closed," Jaffe said. "It's not to say it's not a good company or it shouldn't exist. What you're seeing is a more accurate or better pricing of risk."
Rick Kline is a lawyer and a partner at Goodwin Proctor. "I think every VC who's on a late-stage, highly valued company is asking their boards to consider direct listing as an alternative," Kline said. "I don't think it's right for everybody but absolutely, sentiment has shifted."
A startup CEO, venture capitalist, and a lawyer gave their opinions on why the IPO market has been in a slump. Possibly providing insight for investors who were unsure or disappointed in this year's IPO class.