
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: September 23, 2015
Counsel
212-286-0747 dbrecher@sh-law.comWhile the lower demand could yield “bargain” IPO prices for longer-term holders, it is all about valuation. Does a company really have great growth potential or will it fall flat?
As we’ve previously discussed on this blog, 2014 was a banner years for IPOs. Investors risked more than $248 billion in the worldwide IPO and venture capital markets last year, with technology companies leading the pack. In 2015, the pace has slowed considerably, particularly in the technology sector.
So far this year, just 11 percent of U.S. IPOs have involved tech companies, according to Renaissance Capital’s latest data. The figure represents a seven year low. Businesses that have recently gone public are also experiencing slumping stock prices.
As The Wall Street Journal recently highlighted, there is no shortage of private technology companies with sky-high valuations. Venture capital firms currently value nearly 120 private companies, including big names like Uber Technologies Inc. and Airbnb Inc., at $1 billion or more, which represents twice as many as in 2014. The ride-hailing and home rental companies are also both expected to see revenue grow significantly this year by up to 400 percent.
While private fundraising remains strong, investors and start-ups appear to be taking notice of the changing public market conditions, which have been volatile thanks to the prospect of rising interest rates and growing concerns over China’s economic slowdown. There are currently very few billion-dollar IPOs in the pipeline for the remainder of the year.
The steady influx of cash is one reason why many tech start-ups can afford to stay private. Rather than pursue an IPO with uncertain success, investors are exhibiting patience and allowing companies to expand and strengthen their businesses outside of the public markets.
Investors and start-ups are likely also leery given the limited success of IPOs over the last year. As reported by The WSJ, the stock prices for at least 10 U.S. companies that have gone public since 2014 have dropped below their last private market valuation. Investors in tech companies have also failed to realize profits if they did not exit soon after the close of the IPO. For instance, shares of Alibaba Group Holding Ltd. dipped below the IPO price in August and are down nearly 39 percent in 2015. Online retailer Zulily Inc., which entered the market in 2013 at $22 per share, was recently acquired by Liberty Interactive Corp. for $18.75 a share. Of course, there are many that have done well, and held their gains, and most stocks respond to the ups and downs of the market. Given the recent market volatility, we can anticipate that trading price sensitivity to the generally unsettled conditions to continue for companies that recently completed their IPOs.
It remains to be seen how the IPO slowdown will impact start-ups and development stage companies that are looking to raise capital privately. We will be closely monitoring these trends and will post updates as they become available.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!