One analyst is predicting 2023 could be the year of the returning IPOs, following on 2022’s dearth of Initial Public Offerings.
Ray Wang, founder and principal analyst at Constellation Research, said in an interview, “There are a lot of IPOs on the horizon that you’re going to see. I think people are waiting for the interest rates to stabilize. If the Fed can get to… [rate hikes of] 0.50% in December and 0.25% in January, I think we might have some hope.”
Tech companies which are reportedly looking at running IPOs in 2023 include corporate travel startup TripActions, cybersecurity company Versa Networks, and payments processor Stripe.
IPOs, once integral to the market, and both a driver, and beneficiary of bull sentiment, were almost non-existent in 2022, That came after 2021, in which, according to EY and Dealogic data, $155 billion in proceeds from IPOs were made by companies listed in the US. Meanwhile, over the first six months of 2022, companies listed in the US only brought in $4.8 billion.
One of the main factors causing the downfall of the IPO in 2022 was the Federal Reserve’s hawkish turn, as it began raising interest rates in earnest in March, and continued throughout the year.
Wang noted, “With interest rates so high, the IPO market sucked this year. It was so bad, right? If you look at tech IPOs, that was in bad shape. If you look at revenues and revenue forecasts, they’re down a little bit. Though they’re still growing for the most part, but half the tech companies reported lower guidance and the other half held guidance.”
Wang says he sees the cloud sector beginning to feel the pressure of the economic headwinds, especially since it has spent so long growing so explosively. He explained, “I just came back from Amazon re:Invent and you can see the tension there. People are trying to figure out how to consolidate cloud spend. They’re trying to figure out how to get the most out of their AI and automation investments… There’s a lot of investment going into analytics, automation, and AI.”
But Wang said he is, “still big on cybersecurity stocks,” singling out Crowdstrike (CRWD) and Palo Alto Networks (PANW) as two names he thinks will do well. In addition, rounding out his tech sector to-watch list is Amazon (AMZN), Apple (AAPL), and Google parent Alphabet (GOOG, GOOGL) he said, adding, “I think there’s a lot of upside in Amazon in the long run but not right now. I’m still bullish on Apple, and I’m still bullish on Google as well.”
