The trend of firms staying private for longer continues as the initial public offering (IPO) market shows no signs of revival, according to Baillie Gifford. Peter Singlehurst, head of private company investments at the Edinburgh-based investment firm, attributes this to lingering investor skepticism following the underperformance of several high-profile IPOs in 2021.
Investor Confidence Remains Eroded
Singlehurst emphasizes that many private companies underestimate the extent of public market investors’ wariness stemming from past IPO disappointments. Notable examples include Trustpilot, Deliveroo, and Alphawave, each experiencing significant share price declines shortly after listing on the London Stock Exchange. This erosion of trust has led investors to favor established public companies with longer operational track records over new entrants with limited financial histories.
Shift Towards Private Capital Raises
Baillie Gifford’s analysis reveals that companies like Stripe and Databricks have successfully raised substantial capital through secondary private share sales, surpassing the total funds raised by the broader tech sector via public listings. This shift indicates a growing preference among firms to remain private, leveraging private funding avenues over public markets.
London’s IPO Landscape: A Comparative Decline
In 2024, the London Stock Exchange witnessed a significant drop in IPO activity, ranking 35th globally with only $576.7 million raised, accounting for a mere 0.53% of the global market. However, when considering follow-on fundraising, the UK improved its standing to fifth place, amassing $28 billion across 73 issues—a 53% increase from the previous year. Notably, Haleon’s two $3 billion follow-on offerings were among the top ten globally in 2024.
Outlook: Awaiting Market Recalibration
Singlehurst suggests that until public markets clearly articulate their value proposition to growth companies, the trend of firms staying private for longer will persist. He underscores the need for companies to demonstrate robust fundamentals and long-term value to rekindle investor interest in IPOs.
