Where have all the IPOs Gone?

Where have all the IPOs Gone?

An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. Historically IPOs have been issued by smaller, younger companies seeking capital to expand, though they are also done by large privately owned companies looking to become publicly traded.

During 1980–2000, the average number of companies that went public in the United states was 310 per year. Since 2000, the average has declined across all sectors, especially among small firms. This has been due to many underlying economic forces and regulatory environment factors.

Source: Statista

One of the main reasons for the decline in IPOs is that Startups are staying private longer and raising money through Venture Capital or Angel Investors, replacing the need to go public and are typically more successful when they delay IPO. Furthermore, the cost and regulatory requirements of being a public company can be burdensome for companies.

Additionally, the volatility of the stock market in recent years has been a risky proposition for companies looking to IPO as well as the underwriters and investment banks who are tasked with determining the initial pricing and investor demand.

Dr. Sanjai Bhagat, Provost Professor of Finance at University of Colorado at Boulder, spoke recently at a Tie Rockies event about the critical component of the entrepreneurial ecosystem, the mergers and acquisitions market, and how innovation influences a company’s success factor and when acquisitions create value for acquirers.

As investors are regaining confidence,  2017 is starting to look better and IPO activity has increased 71.1% from the same period last year with over 65 IPOs already filed. The strong equity evaluation and positive performance is expected to attract more companies to the public market.