Letter: Tech groups offer safe haven for investors in IPO storm

Martin Glass, a partner at law firm Jenner & Block, is correct that people are suspending initial public offerings rather than abandoning ship (“IPO values ​​drop 90% in Europe and US States as Inflation and War Take Their toll,” Report, June 6). Additionally, IPO-ready tech companies have the best chance of weathering this particular storm.

We recently gathered data on the successes and failures of tech IPOs over the past decade. Overall, the listing’s total market capitalization is $2.25 billion,

with an average tech IPO growth of 252%. During the pandemic, emergency quantitative easing (QE) from central banks and interest rates dropping to zero meant people invested more.

As a result, 2020 and 2021 were peak years for IPOs – but we are now at the end of that peak. Some high-profile companies have failed: Robinhood, Lyft, and Coinbase have performed poorly relative to expectations, showing how difficult it is to predict how the markets will move at the best of times.

Our analysis shows that tech IPOs have a better chance of winning if you can buy them at the listing price, but also that tech IPO returns are much larger in the short term, up to 2 to 3 times those of general IPOs.

A total of 26 IPOs have been listed when the market was down 5% or more, seven when down 10% or more – but they are among the most successful, including Facebook and ServiceNow.

Of these seven, three companies have negative returns from the date of listing, but three have significant returns. The average return is 623% since listing and 463% since open date. Obviously, if a company is strong and resilient, going public during a tough time doesn’t affect long-term returns.

Yet, it would be unwise to conclude that these companies choose to go public despite an unfavorable market. Going public is a lengthy process that can take years; delaying it can be costly and damage reputation.

However, the observation that strong companies have done poorly at the open during tough markets but have performed well over the long term is true – some comfort as this storm lingers.

Humberto Ayres Pereira
Managing Director and Co-Founder, Rows
Porto, Portugal