On the same On the day that Deliveroo’s IPO failed early in trading, Compass announced via a new S-1 filing that it would reduce the number of shares in its impending IPO and sell them for a lower price.
Taken together, the different market signs could indicate a moderate to moderate cooling in the tech IPO market.
The move by Compass, a venture capital-backed residential brokerage, to lower its implicit valuation in the public market and sell fewer shares is a rebuke of the company’s earlier optimism about its valuation and ability to raise capital. The company’s IPO is still expected to generate up to half a billion dollars, so it can hardly be called a failure if it runs at its reinvigorated price bracket, but the cuts count.
Especially when you consider several other factors. Deliveroo’s IPO, as discussed this morning, has been affected by more than just economic considerations. And there are questions about how much stock markets in seemingly more conservative countries will be interested in unprofitable, growth-oriented companies.
But in addition to this mix are recent declines in the valuation of public software publishers, which makes it possible to reassess the value of recurring revenues at high margins. The reasons for this particular change are manifold, but may include a rotation of public investors into other asset classes, or an air lease from a sector that may have benefited from valuation inflation over the period. last year.
In that vein, SMB cloud provider DigitalOcean’s post-IPO declines from its bid price are a bit more understandable, as is the lack of a higher price gap from Kaltura, a video-focused software company looking to get listed.
Taken together, the different market signs could indicate a moderate to moderate cooling in the tech IPO market. For a host of businesses looking to debut through a PSPC, this could turn out to be bad news.