The Economist - USA (2020-08-22)

52 TheEconomistAugust 22nd 2020

1

T

he ipo is dead, long live the ipo. When

the pandemic hit in March, initial pub-

lic offerings, particularly those by techno-

logy startups, were predicted to be among

the early victims. After all, who wants to go

public in a once-in-a-century crisis?

Quite a few people, it turns out. In the

past couple of months ipos, which all but

dried up until late May, have come back

with a vengeance in America. None of Sili-

con Valley’s recent and upcoming listings

rivals that of Ant Group. The payments af-

filiate of Alibaba, an online giant, wants to

raise a record $30bn in China by October,

which could value the firm at around

$200bn. But America’s technology startups

have brought in $10bn so far this year (see

chart 1)—and there is more to come. On Au-

gust 19th Airbnb, which rents homes to

travellers, filed for an ipo. Other privately

held “unicorns” reportedly ready for public

pastures include Snowflake Computing,

which makes cloud software; DoorDash,

which delivers food; and Instacart, which

delivers groceries. Add Palantir, a cryptic

data-management firm preparing for a di-

rect sale of existing shares in public mar-

kets, and the latest combined valuation of

these five is $80bn, according to Pitchbook,

a data provider. Even if they float only a

portion of their shares, billions-worth of

fresh tech stocks will soon trade publicly.

This flurry of activity has not reached

dotcom-bubble territory from the turn of

the century, when dozens of startups float-

ed each month. But there is a whiff of “irra-

tional exuberance” in the air, detects Lise

Buyer, who has watched technology stocks

since the heady late 1990s and now helps

startups with ipos at Class vGroup, an ad-

visory firm. When Duck Creek, an insur-

ance-tech company, went public on August

14th, it closed nearly 50% higher. Big-

Commerce, an online-shopping platform

which floated a week earlier, saw its shares

“pop” by more than 200%.

With the s&p500 index of big American

firms at an all-time high, never mind that

covid-19 rages on, investors’ rationality is

certainly up for debate (see Buttonwood).

But for many startups, the desire to go pub-

lic is perfectly rational, for two reasons.

The first has to do with the financial

markets themselves. Venture capitalists

who had been pouring billions into unlist-

ed firms began to cool on frothy startups

before the pandemic, after a few unicorn

listings disappointed (Lyft and Uber) or

collapsed (WeWork). At the same time,

rock-bottom interest rates are pushing

public capital to seek returns. As a result,

Technology listings

Partying like it’s 1999

SAN FRANCISCO

Initial public offerings are back in Silicon Valley amid the pandemic,

after a fashion

Not so listless

United States, initial public offerings

January 1st-August 19th, $bn

Source:Dealogic

80

60

40

20

0

201715131109072005

Technology Other

1

Business

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