IPO Market Will Not See a Recovery in 2024 As many investors had hoped — at least not yet. High interest rates (despite a 50 basis point rate cut this week) and uncertainty surrounding the U.S. election have pushed many companies to stay private. Wait for better market conditions..
But a handful of companies have gone public this spring. Corporate rewards platform Ibotta, which builds the back-end rewards program infrastructure for corporate customers like Walmart and Exxon, was one of them, debuting on the New York Stock Exchange on April 18. Initial public offering at a price above its initial price range The stock price was $88, and it debuted at $117 per share. It is currently trading at $63 per share with a market cap of $1.7 billion.
Ibotta CEO Brian Leach told TechCrunch that five months after his company went public, he has no regrets about going public this year. Going public takes months of planning, and he believes companies that try to time the market are making a “huge mistake.”
“Who knows what the Fed will do?” Leach said. “Bankers say it’s always better to wait, but you never know what will happen when you wait. Ultimately, it’s not a destination, it’s a stage.”
Many companies that were expected to go public in 2022 or 2023 are still waiting on the sidelines. Many of these companies are sitting on huge valuations earned from funding rounds during the boom days of 2021, and will have to endure a price cut to go public. There were 310 initial public offerings in the U.S. in 2021, according to PitchBook data. That has fallen sharply since then. There were 80 in 2022, 85 in 2023 and 37 in the first half of 2024.
Leach acknowledged that some people take the fact that Ibotta’s stock has fallen about 50% since its IPO as a sign that going public at this time wasn’t the right decision, or that the company should have waited. However, he feels it’s too early to draw such conclusions, noting that Instacart’s stock is now trading close to its initial price — it was worth $1.5 billion in 2017. 52 week high today – One year after its IPO.
“Things are going well,” Leach said. “We’re the largest tech company to go public in Colorado history. The stock went up and down, and that stabilized over the course of the year. From a company perspective, we’ve been pleasantly surprised by the value we’ve gotten from being a public company.”
Public companies also have an aura of legitimacy, and Leach said leveraging influence is helpful when it comes to attracting potential corporate customers. The company’s recent deal with Instacart probably wouldn’t have happened if Ibotta was still private, he said.
“They trust us,” Leach said. “We have a certain level of legitimacy. They know we have the resources. They can see our finances. They can see we don’t have any debt. There’s a level of comfort that comes with being a public company.”
The same level of legitimacy applies to hiring, he added. Ibotta no longer offers stock options tied to a special valuation offered by investors without downside protection, which Leach said makes the company a more attractive option for talent.
Companies that are still hesitant about going public shouldn’t try to time the market, Leach said, but should wait until they are ready to go public.
Going public in April wasn’t the company’s first option, either. During the IPO wave of 2020 and 2021, Ibotta investors began clamoring for it to go public, so the company hired bankers and wrote an S-1, the document filed with the U.S. Securities and Exchange Commission that kicks off the IPO process. The company was ready to go on an IPO roadshow in the fall of 2021, but decided to wait.
Leach said Ibotta had a big deal with Walmart to run a version of its rewards program at the time, but he wanted to be able to prove the deal actually worked before going public. Not everyone was happy with the company’s decision to wait.
Still, Leach believes it was the right call. Waiting until 2024 allowed Ibotta to go public after six quarters of profitability and getting its finances in order. He believes other late-stage companies in the same boat shouldn’t wait until the market improves.
Investors don’t seem to mind waiting for companies—at least they don’t say so publicly. But the IPO market is bound to open up again eventually. Interest rates are falling, and there are growing rumors of companies hiring bankers to start the IPO process. Companies may be done waiting by 2025.
