By Emily Bary
As the IPO market slowed down at the end of 2021, companies that had been expected to jump on the hot market were left out in the cold, but many of them are still expected to test the waters in 2022.
Technology companies dominated the market for initial public offerings in 2021, representing nine of the 10 largest deals, according to David Ethridge, the U.S. IPO services leader at PwC. And with companies staying private longer, there remains a deep backlog of mature technology companies that could finally make their debuts in the year ahead.
Among the most highly anticipated candidates within the tech sphere are social-networking platform Reddit, grocery-delivery service Instacart, and data-analytics company Databricks. And following what Rainmaker Securities managing director Greg Martin called a “banner year for fintech” deals, more attention will be focused on Stripe, which notched a $95 billion private-market valuation this year but has thus far resisted the public markets.
Here’s what to watch for among tech and fintech IPOs, and beyond, in the year ahead.
Late to the gig IPO party?
Instacart had its moment at the height of the pandemic, as lockdowns drove more people to try out grocery delivery. But unlike fellow gig-economy player DoorDash Inc. /zigman2/quotes/222973991/composite DASH -7.48% , which went public in December 2020, Instacart has held off on an IPO, instead going through some management changes and working on new growth initiatives.
Chief Executive Fidji Simo, a Facebook veteran, has been at the helm since the summer, and Instacart could be inching closer to a debut, potentially in the second half of 2022. New CEOs typically need nine months to a year leading their companies before they can launch into an IPO, according to MKM Partners analyst Rohit Kulkarni, and Instacart in particular may also need a few more quarters “to go through all these reopening headwinds.”
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The company was last valued at $39 billion in a March 2021 private funding round. One key question is whether the company can live up to that valuation in an IPO that takes place during something more closely resembling post-pandemic times.
“It’s hard to replicate what they did in 2020,” said Martin, whose platform Rainmaker Securities allows for the trading of pre-IPO shares in private companies. “The valuation may have gotten a bit ahead.”
An Instacart spokesperson declined to comment about the company’s IPO ambitions.
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Reddit has helped launch meme stocks, and now the company looks closer to having a stock of its own. The message-board company announced in December that it has filed confidential paperwork with the Securities and Exchange Commission for a potential IPO after being valued at about $10 billion in an August funding round.
Reddit is perhaps best known in the investment community for its WallStreetBets “subreddit,” a forum on which users discuss stock picks and other topics around trading. The company makes money through advertising and a paid membership tier through which users can browse the app without ads and access other perks.
As a private company, Reddit has avoided some of the scrutiny that fellow social-media companies Twitter Inc. and Facebook-parent Meta Platforms Inc. have faced over their roles in the spread of misinformation online. By going public, Reddit could find more of a spotlight on its practices and policies.
The company reportedly is on track to generate $350 million in revenue this year, according to The Information , at least double its 2020 total.
Reddit may not be the only social platform to test the public markets in 2022, with Martin noting that he’s seen strong secondary-market demand for Discord on his platform, suggesting that the company is one to “keep an eye on” in the year to come.
“We don’t have anything to say at this time,” a Discord spokesperson said in response to MarketWatch’s inquiry about potential IPO plans.
The year of Stripe?
Likened to Amazon.com Inc.’s /zigman2/quotes/210331248/composite AMZN -8.43% AWS cloud-computing business except for payments infrastructure, Stripe helps power many hot tech companies, including Lyft Inc. /zigman2/quotes/208999293/composite LYFT -0.97% , Peloton Interactive Inc. /zigman2/quotes/208035743/composite PTON -4.12% and Shopify Inc. /zigman2/quotes/209033712/composite SHOP -1.31% Similar to Square-parent Block Inc. /zigman2/quotes/205989440/composite SQ -4.19% , the company provides payment-processing technology, invoicing tools, and business financing, among other features.
But with a private-market valuation of nearly $100 billion, Stripe continues to test the boundaries of how long a hot technology company can avoid the public markets. Will 2022 finally be the year that the fintech giant takes the plunge?
IPO watchers are split on whether Stripe will make its debut. Given the company’s secrecy about potential IPO ambitions, it seems that Stripe executives are content operating the business as a private company, Kulkarni said. He would be “surprised” to see Stripe turn public in the year ahead.
Martin, a shareholder of Stripe, is more upbeat about the chances. “The company is so tightly controlled by the founders, and there’s some sense that they never need to go public,” he said, given that Stripe has been able to offer liquidity for investors and raise new capital easily. Still, he expects the company will hit the IPO market in 2022.
A fintech parade
Stripe isn’t the only hot fintech among rumored IPO candidates. The year ahead could bring “five or six massive ‘decacorn'” IPOs in the fintech space, said Martin, acknowledging that Stripe’s would actually be a “centicorn” deal given that the company is hovering around a $100 billion valuation.