With the S&P 500 at record highs and average IPO returns handily beating the broad market indices, the US IPO market should have produced high levels of issuance in 2016. Instead, proceeds fell to their lowest level since 2003 and activity was the worst since 2009. This seemingly contradictory year can be explained in part by the market freefall in the 1Q that resulted in numerous postponements, the Brexit vote in the 2Q and the US presidential election in the 4Q. However, that doesn’t explain the 800-pound gorilla still in the room: the two-year drought in technology IPOs, the bread and butter of the IPO market. It is our long-held opinion that the primary reason for the lack of tech IPOs is the public-private disconnect on valuation, a tension that can only be remedied by VCs caving in to their growing urgency to sell aging vintages in their portfolios, or by time as companies grow enough to justify their lofty private valuations. With high-growth recent tech IPOs like Twilio and Nutanix trading very strongly, we believe that tech IPO activity will pick up significantly in 2017 and 2018, breaking the long IPO Recession of 2015-16.
View our 2016 US IPO Annual Review 
