The landscape of initial public offerings (IPOs) has been rather subdued in 2024, despite hopes that the market would rebound following a period of cautious optimism. As interest rates remain elevated and uncertainty looms over the upcoming U.S. election, many companies are opting to stay private, biding their time for more favorable conditions. This trend has led to a significant decrease in IPO activity compared to the boom years of 2021, when a staggering 310 companies went public. According to PitchBook data, that number plummeted in subsequent years, with only 80 IPOs in 2022, 85 in 2023, and a mere 37 through the first half of 2024.
However, a few companies have managed to navigate this challenging landscape. One notable example is Ibotta, an enterprise rewards platform that went public on April 18, 2024. Priced initially at $88 per share, Ibotta’s stock debuted at $117, reflecting a positive reception from investors. As of now, the stock is trading at $63, giving the company a market cap of approximately $1.7 billion.
Ibotta’s CEO, Bryan Leach, stands firm in his belief that going public was the right decision, even with the stock’s substantial decline. “Who knows what the Federal Reserve will do?” he remarked, emphasizing that waiting for the perfect market conditions can be a gamble. He warned that companies trying to time their IPOs might be making a “huge mistake.” The sentiment resonates with many in the industry who see the value in moving forward regardless of market fluctuations.
Leach’s perspective is underscored by the experiences of other companies that have gone public under less-than-ideal conditions. For instance, Instacart, which had its IPO a year prior to Ibotta, is currently trading near its debut price, indicating that market conditions can shift rapidly. Leach notes, “Things are going great,” pointing out that Ibotta is the largest tech IPO in Colorado history, and despite the ups and downs of stock prices, the long-term benefits of being a public company are evident.
The advantages of being publicly traded extend beyond mere financial metrics. Leach argues that public companies carry a certain legitimacy that can be crucial for attracting enterprise customers. He highlights a recent partnership with Instacart, suggesting that such deals may not have materialized had Ibotta remained private. “They trust us,” he states, noting that the transparency of public finances and the lack of debt provide a comforting layer of security for potential partners.
This legitimacy also enhances Ibotta’s ability to attract talent. The shift from offering stock options tied to private valuations to a more stable public structure makes the company a more appealing choice for prospective employees. As organizations increasingly seek top talent, having a public status can serve as a critical differentiator.
Leach advises companies contemplating an IPO not to focus on timing the market but rather to ensure they are genuinely ready to embrace the challenges and opportunities that come with public status. This approach requires careful planning and preparation, as evidenced by Ibotta’s own journey. Initially, the company was poised to go public during the SPAC and IPO frenzy of 2020 and 2021. However, Leach chose to delay, wanting to demonstrate the viability of a significant deal with Walmart before taking the plunge. This decision to wait ultimately allowed Ibotta to enter the public market with six quarters of profitability, providing a more robust foundation for investors.
While investors currently appear patient, waiting for companies to make their moves, there is a growing belief that the IPO market will open up again in the coming years. As interest rates show signs of decreasing, speculation surrounding companies hiring investment bankers to initiate the IPO process is increasing. A resurgence in IPO activity may be just around the corner, particularly as more firms prepare to follow in Ibotta’s footsteps.
Ultimately, the landscape for IPOs remains complex and multifaceted. Companies must weigh the benefits of going public against the current market conditions, all while ensuring they are truly prepared for the transition. For those like Ibotta, the path forward may be laden with challenges, but the potential rewards of public status — legitimacy, financial transparency, and increased market presence — can make the journey worthwhile.
