The IPO market is not rebounding sharply in 2024 as many investors had hoped — at least not yet. Rising interest rates (despite a 50 basis point cut this week) and uncertainty related to the U.S. election are causing many companies to remain private, waiting for market conditions to improve.
However, several companies did go public this spring, including Ibotta, a business rewards platform that builds back-end rewards program infrastructure for corporate clients such as Walmart and Exxon. It listed on the New York Stock Exchange on April 18. The company priced its IPO at $117 per share, above its initial expected price range of $88 per share. It is currently valued at $1.7 billion and trading at $63 per share.
Five months after its IPO, Ibotta CEO Brian Leach told TechCrunch that he doesn't regret going public this year. Going public requires months of planning, and he thinks companies that try to time the market are making a “huge mistake.”
“Who knows what [Federal Reserve] “Is that okay?” Leach said.[Bankers say] “It's always good to wait, but you never know what's going to happen if you wait. After all, it's a stage, not a destination.”
Many companies that were expected to go public in 2022 or 2023 are still on the wait-and-see side. Many of these companies are sitting on big valuations that they gained in funding rounds during the boom years of 2021 and will have to take a write-down to go public. According to PitchBook data, there were 310 IPOs in the U.S. in 2021. The number has declined sharply since then: 80 in 2022, 85 in 2023, and 37 in the first half of 2024.
Leach acknowledged that some might see the fact that Ibotta's stock price has fallen nearly 50% since its IPO as evidence that going public now wasn't the right decision, or that the company should have waited. Still, he felt it was too early to draw such a conclusion, noting that today, a year after its IPO, Instacart's stock is trading close to its opening price (it hit a 52-week high).
“It's going well,” Leach said. “We're the largest technology IPO in Colorado history. The stock price has gone up and down a lot, but it's settled down over the course of a year. From a company standpoint, we've been pleasantly surprised at how much value we've gotten as a public company.”
Being a public company also comes with an air of legitimacy, and Mr. Leach said that clout helps in courting potential corporate customers: He said Ibotta's recent deal with Instacart might not have happened if it was still private.
“They trust us,” Leach said. “We have a certain amount of legitimacy. They know we have resources. They can see our financial situation. They know we have no debt. [being a public company] We will provide it.”
He added that the same level of legitimacy is required when it comes to hiring.Ibotta has stopped offering stock options tied to private valuations by investors who could hedge against downside risk, making the company a more attractive option for top talent, Leach said.
Leach said companies that are unsure about whether to IPO should wait until they're ready to go public, rather than trying to time the market.
Going public this April also wasn't the company's first choice. Amid the SPAC and IPO boom of 2020 and 2021, Ibotta investors began seeking an initial public offering, and the company hired bankers and prepared an S-1, the SEC document that kicks off the IPO process. The company was poised to hit the road in fall 2021 for an IPO but decided to hold off.
At the time, Ibotta had a major contract with Walmart to run a white-label version of the company's loyalty program, but it wanted to prove that the deal actually worked before going public, according to Leach. Not everyone was happy with the company's decision to wait.
Still, Leach feels it was the right choice: Waiting until 2024 allowed Ibotta to go public and turn its finances around on the back of six profitable quarters, and he doesn't think other later-stage companies in the same situation should wait for a “better” market.
Investors don't seem to mind companies waiting. At least, they're not saying so publicly. But the IPO market should open up again eventually. Interest rates are starting to fall, and rumors are growing about companies hiring bankers to kick off the IPO process. By 2025, companies might stop waiting.