IPO Market Cool Down May Mean Opportunity for Secondary Markets

Employees and investors who hoped for a 2022 windfall from their options may have to wait a bit longer or seek out secondary liquidity remedies as the IPO market cools and SPACs fall flat.

The U.S. IPO market had its most sluggish first quarter in six years, with only 18 IPOs raising around $2.1 billion, according to IPO research firm Renaissance Capital’s recent review. War in Ukraine also has had a cooling effect on Europe-based IPOs.

But startup employees still want liquidity, especially those who were expecting an IPO or SPAC this year, given how active 2021 was for public-market debuts. At the end of 2021, the Wall Street Journal reported that two-thirds of companies that went public that year were trading below their IPO prices. The sell-off continued into 2022 and pending signs of higher rates not only are driving down stock prices but slowing the IPO pipeline for 2022.

In an interview with Crunchbase, Patrick Healey, founder of Caliber Financial Partners, said that well-established startups that may have been contemplating going public in 2022, including Stripe, will wait until conditions steady and better valuations may emerge. Many other investment bankers are advising the same for their clients considering an IPO.

Employees hoping for proceeds from an IPO may now be shifting toward secondary markets platforms such as Equityzen and Forge which offer “liquidity for illiquid company stock” by purchasing their pre-IPO shares. The platforms tout quick transactions with light paperwork so that employees and early investors can “get the liquidity you deserve.”

Both platforms report steady interest and activity.