What’s Next for the Tech IPO Market

Market Activity Trends

• Deal activity experienced a brief pause of a few weeks immediately following the economic shutdown as markets assessed the new information.
• Markets recovered rapidly, with investment banking volumes reaching levels not seen in years, described by veteran bankers as "incredible."
• Companies originally targeting 2022 IPO timelines are accelerating plans to launch sooner due to the robust market environment.

Drivers of Growth

• The pandemic accelerated digitalization trends, forcing the rapid adoption of technology to sustain economic activity remotely.
• Technology and healthcare sectors are attracting investors due to accelerated growth profiles and improved profitability.
• Valuation levels for these sectors currently exceed those recorded prior to the onset of the pandemic in early March.

Operational Shifts in IPO Execution

• The standard "roadshow" process has condensed from nine days to five days to market.
• Pre-COVID roadshows required management teams to visit 60+ investors in person across the US and globally over nine days.
• Post-COVID roadshows are conducted entirely remotely, with meetings held from the CEO's and CFO's homes.
• The remote model has increased efficiency by eliminating travel, driving, and excessive printing.

Direct Listings and Capital Raising Innovations

• Discussion around direct listings has increased following a brief pause at the start of the pandemic.
• Direct listings involve registering existing shares with the SEC and determining price via a market-based auction on the trading day, contrasting with traditional IPO pricing the day prior.
• Successes such as Spotify (2018) and Slack (2019) have established the direct listing as a viable alternative in the tech and venture capital space.
• The rise of direct listings has prompted broader client conversations regarding transparency, employee share access, and investor exit timing.

Structural IPO Adjustments

• Investment bankers are working with clients to customize traditional IPO terms to better align with specific client objectives.
• Key adjustable mechanisms include the size of the offering, the structure of the deal, and lockup release terms governing when existing investors can sell shares.