The Longer IPOs Delay, The Less Likely Debuts Will Happen

Going public is not a decision any company takes lightly. For complex, high-revenue businesses in particular, an IPO filing reliably requires years of preparation and hefty investment.

Likewise, postponing or canceling a planned debut is never a flippant choice. Sometimes there鈥檚 a positive reason, like an acquirer swooping in with an attractive offer. More commonly, it鈥檚 a negative one, like a market downturn.

Over the past couple weeks, as we鈥檝e seen , and others scheduled pre-IPO roadshows, it appears markets are to blame. It was tough to feel good about going public in a week in which posted its third-largest in history.

That鈥檚 reasonable enough. But for market watchers, the questions remain: Where do IPO candidates go from here? Will they resume roadshows? Is the new offering market in for a long freeze?

What history tells us

鈥淥bviously it depends upon what happens in the markets,鈥� said , a emeritus professor known for IPO research.

So far, not too much time has passed since the most recent IPO delays. Companies could presumably restart roadshow plans without too many hurdles should they deem conditions acceptable.

The longer the delay, however, the less likely it becomes that a onetime IPO candidate will actually carry out its debut. Ritter, for example, found it difficult to come up with high-profile companies that publicly filed, delayed for a long interval, and went on to carry out successful offerings.

SA国际传媒 research also provided few examples. One that stood out was construction tech company , which initially filed to go public in early 2020 and made its debut over a year later.

There鈥檚 also an unsuccessful famous example: . The coworking company filed for an IPO in 2019, but delayed after its valuation plummeted and later withdrew. WeWork eventually went public via SPAC in 2021 and filed for Chapter 11 bankruptcy two years later.

Delaying a public filing is more common

More commonly, companies delay making a public filing in the first place when conditions become less inviting.

for example, put off plans for a 2020 IPO when the pandemic hit. It made its eventual, well-received debut in late 2021. filed to go public in 2022, but put off for over a year.

More recently, AI chip developer hit pause on its planned debut, after submitting its IPO in September. Its offering has faced delays in part due to .

We鈥檝e also seen companies file confidentially to go public but delay making a public filing.

Digital bank is one such example, having reportedly submitted its confidential paperwork in December, but no public prospectus yet. A more distant case is business travel and expense platform , which filed confidentially to go public a few years ago.

On a brighter note, we saw a new confidential filing this week as design software platform plans a public listing following its scuttled sale to .

When does a delay turn into a withdrawal?

It鈥檚 possible to delay an offering for quite some time after submitting initial paperwork. However, eventually a company must choose whether to proceed or withdraw.

It鈥檚 a weighty decision, and no company takes bowing out of the process lightly. Furthermore, such a move makes it more difficult to go public in the future.

鈥淭he act of withdrawing casts a ‘scarlet letter’ on the withdrawn firm such that entering the public markets at a future date is much more difficult and less lucrative,鈥� said , a assistant professor who published a last year on the consequences of withdrawing an IPO.

Per Humphrey, between 1997 and 2021, approximately 1 in 6 IPOs attempted on the and were withdrawn. Collectively, that amounted to hundreds of billions of dollars in unrealized growth capital.

Probably the most recent high-profile example is peer-to-peer car rental platform , which withdrew its long-planned IPO in February. The decision followed a dismal start to the year for the San Francisco company, whose public image took a hit after attackers used vehicles rented on its platform in two separate New Year鈥檚 Day attacks.

Will further withdrawals follow? Hard to say, of course. Markets have offered some encouragement in recent days, with major tech indices trading well above their near-term lows. We鈥檒l see if it lasts.

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