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Welcome back! Initial public offerings are generating buzz again, and share prices of tech listings have doubled on average this year. The Nasdaq has been at an all-time high, today’s big-tech stock sell-off notwithstanding. And Chamath Palihapitiya is raising money for a special purpose acquisition company. Are we about to hit a speculative IPO and SPAC frenzy reminiscent of 2021? It’s starting to feel like it, at least for companies in crypto or artificial intelligence. Retail traders have bid up those stocks rapidly. That fervor, in turn, makes hedge funds and asset managers eager to get a piece of every new listing, fearful of falling behind their peers. And ’round and ’round we go. Just how hot the IPO market gets is a dominant storyline going into the fall, when new listings will pick up in earnest. Venture capitalists and their limited partners, who haven’t seen much cash returned on their investments recently, are watching, hoping and praying. Here’s my cheat sheet for what to watch in the upcoming IPO and SPAC markets: Will unprofitable companies make friends with investors? Rocket launch company Firefly Aerospace went public earlier this month, a week after Figma’s blockbuster offering. Firefly produced a lot less fanfare and a smaller stock pop. But the company represented another meaningful marker: It pulled off an IPO with little expectation of profits for at least the next couple of years. That’s even more impressive for a business in the space industry, which has burned public investors in the past. Nearly every other tech IPO this year had at least some form of profits in the past year. (CoreWeave, an AI data center operator, was the notable exception when it went public in March. Its rapid growth has largely distracted investors from its heavy debt and big losses.) The next test will be the Winklevoss brothers’ crypto exchange, Gemini, which is losing a ton of money, quarter after quarter. (Last quarter it saw a $133 million loss on $33 million in revenue.) If investors get behind those kinds of numbers, a lot of bankers’ eyes will widen. How will the private tech geezers fare? Aside from AI and crypto, the other type of tech firm that might benefit from an IPO boom is the “geriatric startup.” These are venture capital–backed firms over a decade old that are under pressure to go public. Their finances are solid, but their growth outlook isn’t compelling enough that they can keep raising money privately at will. That profile describes much of the next crop of VC-backed IPOs: StubHub, Klarna, Navan, Motive and Netskope. They shouldn’t be too controversial a buy for IPO investors, if the price is right. But none of them is likely to ignite a frenzy among retail investors. If any of these companies does trade up significantly after its listing—like Reddit and Rubrik, which have more than doubled since their listings last year—it’ll entice more companies to list. Will SPACs come for defense tech and chip startups? In 2020 and 2021, SPACs became a helpful vehicle for capital-intensive, future-facing startups to get cash infusions and go public with less scrutiny. That led to some spectacular run-ups, and then collapses, for electric vehicle firms (Nikola, Lucid Motors), real estate tech firms (Opendoor, WeWork, Sonder), and health tech (23andMe). Companies eyeing the SPAC route now will need to convince investors that they are different. They will instead compare themselves to companies that have performed relatively well since going public via SPAC, like SoFi, Hims and Grindr. Those comparisons will probably have consequences. New groups of cash-hungry SPAC candidates have emerged. Upstart cloud providers are springing up in hopes of renting out chips to AI companies—a rickety business model if ever there was one. Defense tech firms trying to sell drones, weapons and software to governments have gobbled up venture cash, but they now might find it easier to raise money in the public markets if they can get retail investors on their side. Chamath called his new SPAC “American Exceptionalism” for a reason. It’s an exciting business, but one that’s proven treacherous time and again. What about the blockbuster offerings everyone is waiting for? We now have seven private tech firms valued in the ballpark of $100 billion or more: OpenAI, Anthropic, xAI, ByteDance, SpaceX, Stripe and Databricks. None is expected to go public this year. None seems likely for next year either, especially after Databricks announced Tuesday it was raising new cash privately. Stripe, SpaceX and ByteDance generate a lot of cash on their own and hold regular private share sales. OpenAI, Anthropic and xAI burn heaps of cash but haven’t had any trouble tapping the private markets. Still, the biggest news for the IPO market would be one of those firms taking real steps to go public. OpenAI might be the most likely candidate, if it can resolve its dispute with Microsoft over its for-profit conversion. I’d expect news to trickle out that the company is meeting with bankers or making other moves to plot a listing. A notch below that weight class of companies is a group that might be more likely to go public by next year. Design software firm Canva, which has discussed a private share sale at $37 billion, has been a strong contender, especially after Figma’s successful IPO. British fintech Revolut, valued at $75 billion, will eventually make moves, too. Another wild card to make blaring IPO headlines would be Anduril, the defense tech company. The firm, heavily backed by Founders Fund, would draw enormous interest due to its rapid growth and comparisons to Palantir, another AI firm with strong Peter Thiel ties that sells software and AI capabilities to the government. Anduril has been open about its IPO ambitions, but the timing likely depends on whether it can build out its own manufacturing capabilities and keep winning major new contracts. Expect it to go sooner rather than later if it can keep growth humming at more than 50% a year.
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