Wall Street bulls may have come thundering back in October as bears appear to have gone into hibernation. But there’s another beast, albeit a mythical one, that has been pretty much absent from the stock market all year: Unicorns. There has been little demand for private companies to make their debuts with initial public offerings.
Only two companies went public last month. According to data from IPO research firm Renaissance Capital, that was the slowest October for the IPO market since 2011. What’s more, only 66 companies have gone public so far this year, down more than 80% from a year ago.
Several high-profile unicorns – the nickname bestowed upon startups that are valued at $1 billion or more based on their most recent round of funding – have reportedly pushed off plans to go public this year. Many hope to do so instead in 2023 if the broader market improves.
That list reportedly includes grocery shopping service Instacart, social media site Reddit and fintech giant Stripe.
SPAC slump hurting the market for new stocks as well
Demand for companies going public via mergers with so-called blank check special purpose acquisition companies, or SPACs, has imploded as well. Only 82 companies have gone public via a SPAC deal so far this year, according to SPAC Research. That’s down from 613 in 2021.
Problems in the SPAC market are more worrisome because when a blank check firm goes public, it typically has about 18-24 months to find a firm to merge with before it is legally forced to liquidate and return to cash to investors.
SPAC leader Chamath Palihapitiya has been forced to shut down several of his blank check firms. Legendary investors Sam Zell and Bill Ackman have also abandoned SPACs this year after failing to identify a viable startup to acquire.
Still, there is some hope that the market for traditional IPOs might be slowly turning around.
One of the two companies that did go public in October was Mobileye, a self-driving car company that had been owned by chip giant Intel (INTC). Demand was strong for Mobileye’s stock. Shares were priced above their offering range and surged nearly 40% on their first day of trading.
Possible 2023 IPOs on tap
That shows that there is still investor demand for companies that are in dynamic, rapidly growing markets. With that in mind, other unicorns could go public in 2023 if the IPO window opens up again.
Crypto king FTX, sports merchandise leader Fanatics, Fortnite owner Epic Games and mobile bank app Chime are among the top 2023 IPO candidates, according to Wall Street analysts.
But IPOs for the two most valuable startups on the planet seem less likely.
TikTok owner ByteDance may be worth $140 billion, according to research firm CB Insights, but a stock listing (in the US at least) probably won’t happen anytime soon given the economic tension between the Biden administration and China regarding export restrictions for American made semiconductors. Chinese firms may choose to go public in Hong Kong or Shanghai instead of New York.
Publicly traded Chinese companies have also been put under more scrutiny by US regulators this year. The SEC investigated the IPO of China’s ride hailing app Didi, for example.
And then there’s SpaceX. The Elon Musk-led space exploration firm is worth $127 billion, according to CB Insights. But Musk has pretty much ruled out an IPO of the entire company.
The Tesla (TSLA) CEO and new Twitter owner has reportedly suggested, though, that an IPO of SpaceX’s Starlink satellite internet business could take place…but not until 2025 at the earliest.
So investors hungry for another mega unicorn like Uber (UBER), electric truck maker Rivian or Airbnb to go public anytime soon may need to keep waiting for awhile.