The IPO Drought: Why Companies Are Choosing to Stay Private
May 28, 2025, 11:58 pm
Location: Netherlands, North Holland, Amsterdam
Employees: 1001-5000
Founded date: 2013
Total raised: $19.31B
The landscape of initial public offerings (IPOs) is shifting. Companies are opting to remain private for longer periods. The IPO drought is a reality that investors and businesses must navigate. The reasons behind this trend are multifaceted, rooted in investor sentiment, market conditions, and the evolving nature of business operations.
In recent years, the IPO market has faced significant challenges. The aftermath of 2021's flurry of public listings left a bitter taste in the mouths of many investors. Companies like Trustpilot, Deliveroo, and Alphawave saw their stock prices plummet shortly after going public. These experiences have created a chilling effect on investor confidence. The scars from these failed IPOs run deep. Investors are wary. They are cautious about new offerings, and this hesitance is palpable.
The head of private company investments at Baillie Gifford, Pater Singlehurst, has voiced concerns about the current state of the IPO market. He emphasizes that companies eyeing an IPO must understand the sentiment of public market investors. Many of these investors feel burned. They are reluctant to invest in companies that present only two years of financial data, especially when those companies come with high valuations. The allure of public markets is fading.
Singlehurst's perspective highlights a critical point: trust must be rebuilt. Investors need to see a clear value proposition before they are willing to take the plunge into new IPOs. The public markets are filled with companies that have established operational track records. These companies, many of which went public in 2020 and 2021, are still digesting their own valuations. Investors are more inclined to invest in these established entities rather than gamble on new entrants with limited histories.
The statistics tell a compelling story. In 2024, the London Stock Exchange fell to 35th in the world for money raised from IPOs, bringing in a mere $576.7 million. This figure represents just 0.53% of the global market. In stark contrast, when considering follow-on fundraising, the UK stock market surged to fifth place, raising $28 billion across 73 issues. This 53% increase from 2023 underscores a significant shift in investor behavior. Companies are finding more success in raising capital through secondary offerings rather than through initial public listings.
The trend of staying private for longer is not limited to the UK. In the United States, tech firms like Stripe and Databricks have managed to raise more capital through secondary private share sales than the entire tech sector achieved via IPOs. This shift reflects a broader trend where companies are leveraging private funding to fuel their growth without the pressures of public scrutiny.
The reluctance to go public is not just about investor sentiment. The operational landscape has changed. Companies today face a myriad of challenges, from regulatory hurdles to market volatility. The complexities of navigating public markets can be daunting. For many businesses, the benefits of remaining private outweigh the potential gains of an IPO. They can focus on growth, innovation, and strategic development without the constant pressure of quarterly earnings reports and stock price fluctuations.
Moreover, the rise of private equity and venture capital has provided companies with ample funding options. These sources of capital allow businesses to scale and innovate without the need to go public. The private market is thriving, offering companies the flexibility to grow at their own pace. This environment fosters creativity and allows for long-term planning, free from the short-term pressures that often accompany public listings.
As companies weigh their options, the question remains: when will the IPO market rebound? The answer is complex. It hinges on the restoration of investor confidence and the stabilization of market conditions. Until then, businesses will continue to explore private funding avenues. The IPO drought may persist, but it is not a death knell for public markets. Instead, it signals a transformation in how companies approach growth and funding.
In conclusion, the IPO landscape is undergoing a significant transformation. Companies are choosing to stay private for longer, driven by a combination of investor sentiment, market conditions, and the evolving nature of business operations. The scars of past IPO failures are still fresh, and trust must be rebuilt. As the market adapts, businesses will continue to seek alternative funding sources, navigating the complexities of growth in a changing economic environment. The future of IPOs remains uncertain, but one thing is clear: the dynamics of public and private markets are shifting, and companies must adapt to thrive.
In recent years, the IPO market has faced significant challenges. The aftermath of 2021's flurry of public listings left a bitter taste in the mouths of many investors. Companies like Trustpilot, Deliveroo, and Alphawave saw their stock prices plummet shortly after going public. These experiences have created a chilling effect on investor confidence. The scars from these failed IPOs run deep. Investors are wary. They are cautious about new offerings, and this hesitance is palpable.
The head of private company investments at Baillie Gifford, Pater Singlehurst, has voiced concerns about the current state of the IPO market. He emphasizes that companies eyeing an IPO must understand the sentiment of public market investors. Many of these investors feel burned. They are reluctant to invest in companies that present only two years of financial data, especially when those companies come with high valuations. The allure of public markets is fading.
Singlehurst's perspective highlights a critical point: trust must be rebuilt. Investors need to see a clear value proposition before they are willing to take the plunge into new IPOs. The public markets are filled with companies that have established operational track records. These companies, many of which went public in 2020 and 2021, are still digesting their own valuations. Investors are more inclined to invest in these established entities rather than gamble on new entrants with limited histories.
The statistics tell a compelling story. In 2024, the London Stock Exchange fell to 35th in the world for money raised from IPOs, bringing in a mere $576.7 million. This figure represents just 0.53% of the global market. In stark contrast, when considering follow-on fundraising, the UK stock market surged to fifth place, raising $28 billion across 73 issues. This 53% increase from 2023 underscores a significant shift in investor behavior. Companies are finding more success in raising capital through secondary offerings rather than through initial public listings.
The trend of staying private for longer is not limited to the UK. In the United States, tech firms like Stripe and Databricks have managed to raise more capital through secondary private share sales than the entire tech sector achieved via IPOs. This shift reflects a broader trend where companies are leveraging private funding to fuel their growth without the pressures of public scrutiny.
The reluctance to go public is not just about investor sentiment. The operational landscape has changed. Companies today face a myriad of challenges, from regulatory hurdles to market volatility. The complexities of navigating public markets can be daunting. For many businesses, the benefits of remaining private outweigh the potential gains of an IPO. They can focus on growth, innovation, and strategic development without the constant pressure of quarterly earnings reports and stock price fluctuations.
Moreover, the rise of private equity and venture capital has provided companies with ample funding options. These sources of capital allow businesses to scale and innovate without the need to go public. The private market is thriving, offering companies the flexibility to grow at their own pace. This environment fosters creativity and allows for long-term planning, free from the short-term pressures that often accompany public listings.
As companies weigh their options, the question remains: when will the IPO market rebound? The answer is complex. It hinges on the restoration of investor confidence and the stabilization of market conditions. Until then, businesses will continue to explore private funding avenues. The IPO drought may persist, but it is not a death knell for public markets. Instead, it signals a transformation in how companies approach growth and funding.
In conclusion, the IPO landscape is undergoing a significant transformation. Companies are choosing to stay private for longer, driven by a combination of investor sentiment, market conditions, and the evolving nature of business operations. The scars of past IPO failures are still fresh, and trust must be rebuilt. As the market adapts, businesses will continue to seek alternative funding sources, navigating the complexities of growth in a changing economic environment. The future of IPOs remains uncertain, but one thing is clear: the dynamics of public and private markets are shifting, and companies must adapt to thrive.