The last major IPO of the year has priced on an up note , and IPO investors are hopeful it will mark the end of three painful years of sub-par IPO raises. ServiceTitan (TTAN), which provides business management software for plumbers, roofers, landscapers and others in the trades industry, will begin trading today on Nasdaq. It is pricing 8.8 million shares at $71, well above the price range of $65 to $67, itself a significant hike from earlier price talk of 8.8 million shares at $52 to $57. “A window is opening” in the IPO market, Greg Martin, head of Rainmaker Securities, a financial brokerage firm that specializes in private securities transactions, told CNBC. IPOs in 2024: A few winners, but mostly forgettable For most investors, 2024 has been a great year. Speculative investors have done well (bitcoin us up 138% year to date), tech investors have done well (the largely tech-oriented Nasdaq 100 is up 29%), and buy-and-hold the market investors have also done well (S & P 500 is up 27%). IPO investors, however, have less to cheer about. The number of IPOs, as well as the dollar amount raised, is well below historic averages for the third straight year. So far, 140 IPOs have raised $28.8 billion in 2024. Pre-covid, a normal year would see roughly $50 billion raised. IPOs: Total raised 2024 YTD: $28.8 billion 2023: $19.4 billion 2022: $7.7 billion 2021: $142 billion (record) 2020: $78 billion 2019: $46 billion 2018: $47 billion 2017: $35.5 billion Source: Renaissance Capital Second, while the Renaissance Capital IPO ETF (IPO), a basket of recent IPOs, is up 22% this year, many of the companies in that ETF are two years old or more. There simply has not been enough IPOs to repopulate it with newer offerings. There are now only 32 holdings in the ETF, with half that were there two years ago. IPO YTD mountain Renaissance IPO ETF Of those that did go public in 2024, there were a small number of standouts. Tech companies that went public have performed reasonably well, there just hasn’t been many of them. Winners included social media platform Reddit , AI and cloud infrastructure firm Astera Labs , cloud data management firm Rubrik , financial management software firm OneStream , and healthcare payments software firm Waystar . Largest IPOs of 2024 (from IPO price) Reddit up 364% Astera Labs up 228% Rubrik up 112% UL Solutions up 80% OneStream up 52% Waystar up 56% Ibotta down 15% Ingram Micro down 1% Why is an IPO window opening? IPO veterans are claiming that a major window for the IPO market is now opening: Markets are at new highs, the election overhang has ended, interest rates have stabilized, and the economy remains strong. “The general sentiment is much more favorable for IPOs than it was earlier in the year,” Martin told me. There’s two things missing from this rosy scenario. First, a sense of desperation. Many tech IPO hopefuls still have plenty of private funding available and can sell shares in the private market for employees and venture capital investors who need to cash out, which provides a major relief valve for companies under pressure to do an IPO. In this category, Martin includes companies such as SpaceX, Stripe, Databricks, and TikTok parent ByteDance. A second piece missing: a return to higher valuations. Many major IPOs are still pricing lower than their most recent private funding rounds. That’s the case with ServiceTitan. At $71, that’s about 15% below the last primary funding round of $84.57 in 2022. Others including Reddit and Tempus AI, also went public at valuations lower than their last private funding. Still, that gap between private and public valuations appears to be getting smaller. “A year ago, the disconnect between private and public markets was very wide,” Matt Kennedy from Renaissance Capital told CNBC. “That gap is now narrowing. A year ago, ServiceTitan might not have gone public, their pricing would likely have been well below the last private round. They may have had to take a 40% haircut. This year, however, the initial price is higher [$71] and while it is still a down round, the price is more palatable.” Who might go public in 2025? Some tech darlings may have the luxury of waiting, but others are under more pressure. There is a second tier of companies that may need to go public sooner because they don’t have unlimited access to capital. Martin said companies in this category include buy now, pay later firm Klarna (which has already filed to go public confidentially), fintech firm Chime, and AI cloud platform CoreWeave. Other companies that have been strong contenders for an IPO include Del Monte (canned fruit), Panera Bread (restaurant chain), and SeatGeek (online ticket marketplace). Other names that have not filed but are on the rumor list include trading platform eToro, Databricks (data software), Epic Games (video games), Rokt (e-commerce/customized deals & discounts), Chobani (yogurt and coffee), Liquid Death (water) and Zipline (supply chain/drone delivery). An end to the IPO drought? There is some enthusiasm for ServiceTitan. They are the dominant service provider for the trades business, for plumbers, roofers, landscapers, pest control. The software can schedule jobs, take payments, handle payroll, and dispatch workers. They have their own customer relationship management that enables them to keep a history of their relationship with customers. It’s a single software platform a plumber, for example, could run his or her entire business off of. “People in the trade business are willing to pay a fee [to a software provider] to focus on their core competency,” Kennedy said. Rainmaker’s Martin, along with many others on Wall Street, is hopeful that 2025 will bring an end to a three-year drought of IPOs. “We haven’t had a lot to talk about in the last three years,” Martin told me. “The market has been strong, but it’s mostly on the back of seven companies. It’s time for more companies to share in the wealth.” What about that “valuation gap” between private and public valuations? Kennedy said it is still an issue, but less so than a year ago. “For some it might be a 10% haircut, for others, a 20% haircut, but it is better than it was a year ago, and for many, it’s good enough to go public.”
