October 2023 Report: The IPO Market is Back Open

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A look into how the early days of trading for KYVO, CART, and ARM may affect the private markets.

The IPO Market is Back Open: Now What?

As of market close on Monday 10/2, Klaviyo (KVYO) is up 11.6%, Instacart (CART) is down 10.1% and Arm (ARM) is trading 2.5% above its IPO price.

2023 Tech IPO's

There may be some early appetite for these IPOs given 2 of the 3 are trading above their offering price. That being said, pricing is tricky due to the extremely high valuations these companies commanded during the boom period. Each company debuted at lower a valuation than they had received privately in the past, but were able to trade with relative stability given all three major indices ended September in the red. This is a small, but important victory early on for these tech IPOs.

While these were the most notable companies to go public during the month, Rayzebio (RYZB) went public on the 15th and is fairing much better. The San Diego-based biotech is currently sitting 14.6% above its IPO price. It is worth noting that Rayzebio was most recently valued at $600M following its Series D in September of last year. They currently sit at more than double that valuation.

As we move forward, prospective IPO candidates will have to contend with the prospects of debuting at a discount to their all time high valuations, as the market has indicated that these are no longer reasonable prices.

Speaking of prospective IPO candidates: Rubrik (cloud data management) and Turo (Airbnb for cars) have both indicated interest in going public in the near-term. Rubrik has raised over $500M since 2015 and has hired bankers to underwrite their IPO. Turo has led us down this path before, filing a private S-1 in 2021 and a public document in early 2022. They have since filed an updated S-1 revealing 59% revenue growth and profitability in 2022 along with continued growth in an unprofitable first 6 months of 2023 (see the S-1 here).

Why this matters: Despite a lackluster couple weeks for tech stocks overall, these stocks have performed well since their IPOs. This will go a long way towards setting the pricing of future exits and funding events. Private company pricing had become somewhat disjointed from the public markets as VC valuations hadn’t been tested in public waters in almost 2 full years. Seeing these 3 large and fairly unique companies (plus the smaller Rayzebio) will allow private investors to evaluate companies with more confidence, as opposed to simply slapping a discount on a 2021 valuation.

For more insights from ESO Fund check out our newsletter ESO's Monthly Start-Up which lands in your inbox the first Tuesday of every month.

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