4 months ago
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The tech IPO market has been exceptionally slow lately, leaving many of us hoping for some catalyst to turn things around.
That made us wonder: Could the election cycle bode well for a 2025 U.S. IPO market pickup? After all, markets loathe high uncertainty. That could make those in the pre-IPO pipeline leary of debuting during a presidential election year.
Perhaps next year, when that uncertainty is behind us, we’ll see the giant backlog of still-private unicorns get busy going public.
To test this hypothesis, we used Crunchbase data from 2000 till today to see whether past post-election years have coincided with an uptick in public offerings on NYSE and Nasdaq.
Usually, but not always
The findings? Usually, but not always.
In the past four presidential election years, IPO activity picked up the following year. The increases followed the election of two Democratic presidents, Barack Obama (for two terms) and Joe Biden, and one Republican, Donald Trump.
Overall, IPO volume increased in four out of the past six post-election years. The two times it didn’t go up — 2001 and 2005 — were after the election and re-election of President George W. Bush, a Republican.
Market cycles matter too
Of course, one also has to look at the broader market cycle in determining why tech IPOs are up or down.
For instance, the year that had the greatest number of new offerings was 2021. At the time, both public tech company valuations and venture investment were hitting historic highs. Markets were already heating up in the 2020 election year, and the momentum intensified for several more quarters.
By the same token, 2001 was the slowest year for IPO activity in our sample. It’s safe to assume that this is because it coincided with the implosion of the dot-com bubble, as tech valuations cratered after peaking in March 2000.
As we look at 2024’s IPO pace, however, broader market performance doesn’t really explain why activity is down. So far this year, just 32 U.S. venture-backed companies have gone public. That puts 2024 on track to be one of the slowest IPO markets in years.
But overall, tech stocks haven’t performed badly this year, despite some pockets of underperformance. And the most closely watched venture-funded unicorns to debut — Reddit and Astera — had recent market caps around $10 billion and $7 billion, respectively, which doesn’t seem too shabby.
Prediction: IPOs will pick up in 2025
Perhaps it’s wishful thinking. But for those of us who’ve followed tech IPOs for decades, it seems like there’s an unusually high concentration of pent-up potential in the late-stage startup pipeline, just waiting for something to spark a rush to public markets.
That rush seems unlikely to come in 2024. For one, it’s hard for high-profile startups to keep plans for a big debut under wraps, and we’d have likely heard whispers of imminent IPO filings if they were coming. Election year uncertainty is likely also a factor, giving pre-IPO companies further incentive to delay filing for a few more months.
So, it looks like 2025 presents the closest opportunity for a major IPO pickup.
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Illustration: Dom Guzman
