Is the IPO boom about to bust?

I-P-Uh-oh

A record year for IPOs is swinging to an end, with HashiCorp and Nubank completing their debuts and Samsara’s listing expected in days. Nearly a thousand companies raised more than $300 billion in the U.S. as of early December, according to Dealogic; the global take is twice that, Bloomberg estimates.

What if we threw a boom and no one noticed? A lingering pandemic, choked-up supply chains and other economic worries have cast a pall over this orgy of capital. The markets have proven hungry for new shares but less friendly after they start trading. The most crucial question now is: In 2022, will the market be as friendly to companies — say, Instacart — that pushed back IPO plans?

This IPO boom has been great for sellers but not for buyers. Roughly half of this year’s big IPOs are underwater, which has to weigh on investors’ appetite for more.

• The Renaissance IPO Index, which tracks newly public companies, is down 9% this year, after dramatically outperforming the S&P 500 since the crash of March 2020.
• Some of the most anticipated offerings have flopped hard. Robinhood has fallen nearly 50% from its offering price of $38 and 76% from its crypto-juiced peak of $85.
• We haven’t even talked about SPACs yet. The quasi-IPOs, which had a spate of popularity as a way to take companies that might not qualify for a conventional IPO public, have been fading fast. There might be some contagion effect, though, as a SPAC’d firm and a regular IPO both look like tempting new stocks to the average investor.

It hasn’t been all bad: AppLovin, an app software company that stumbled in its debut, is up 39% since then and is now above its offering price. And Nubank, an online bank whose shares started trading Thursday, saw its shares rise another 9% Friday. But the IPO market needs more success stories to keep investors buying.

Inflation is the big threat. Fears of inflation rattled the IPO market earlier this year, with some companies pulling or delaying their listings. Those worries faded, but 2022 may be different. Maybe.

• The bull case: There are a number of high-quality companies yet to go public. Private equity has let firms delay an IPO, and even Sand Hill Road is reinventing itself around the idea that VCs don’t have to push companies to go public on some artificial timeline.
• Stripe, Klarna, Instacart and others are still private.
• Goldman’s Kim Posnett points out that there’s still a lot of money that wants to be put to work. Market volatility might affect specific timing, but not the need to identify opportunities to deploy capital.
• Or as Jeff Goldblum’s character in “Jurassic Park,” scientist Ian Malcolm, put it: “Life finds a way.”

The biggest irony? All these companies raising money may in some small way be juicing the inflation that now threatens them. Sure, IPOs make founders, bankers and VCs rich, but most of the money raised gets put to work hiring people, building data centers, and running splashy ad campaigns. All of that gets injected back into the economy. Is there such a thing as too many IPOs? If so, it’s a high-class problem.

— Owen Thomas (email | twitter)

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People are talking

FTX’s Sam Bankman-Fried said some “straightforward” steps could help crypto evolve:

• “Having a clear markets framework for digital assets would be really important.”

Amazon explained its outage last week, but experts like cloud economist Corey Quinn said there are still unanswered questions:

• “They don’t explain what this unexpected behavior was and they didn’t know what it was. So they were guessing when trying to fix it, which is why it took so long.”

New Constructs’ David Trainer isn’t phased by any of his bad IPO calls:

• “Crazy stuff happens. I can’t let that bother me. I have to stay true to what I think is right.”

If Santa comes up short this year, blame it on the chip shortage, Forrester’s Glenn O’Donnell said:

• “If you don’t already have what you want to put under the tree, you may be out of luck. Even Santa himself won’t be able to deliver.”

Coming this week

365 EduCon DC starts tomorrow. The conference features experts in using Microsoft 365, Teams and Azure.

The FCC is holding an open meeting tomorrow. The commission is expected to talk about rules for low-orbit satellite systems.

Oppo’s introducing its first foldable phone on Wednesday. Yet again, companies are betting on a technology that remains a hard sell.

A documentary on William Shatner’s space journey will be released Wednesday. “Shatner in Space” will air on Amazon Prime.

Closing arguments in the Elizabeth Holmes trial may start Thursday. Her lawyers rested her case last week.

Escape2021 is on Thursday. The event is YouTube’s new way of looking back on the year by highlighting the biggest trends and videos of 2021.

In other news

An Amazon warehouse collapsed, killing at least six people. The warehouse, near St. Louis, fell when a tornado tore through the area, raising questions about whether workers should be able to access their phones during shifts.

Michael Strahan took part in Blue Origin’s latest trip to space. The TV personality and five others, including Laura Shepard Churchley, a daughter of the first American in space, boarded the company’s third human spaceflight.

Vishal Garg is taking a break from Better.com. The CEO who fired hundreds of people over Zoom is taking time off from the company, and Better is hiring a third-party group to examine its leadership and culture.

A rise in crime is keeping ride-hailing drivers off the roads, according to The Wall Street Journal. Uber and Lyft are trying to boost security efforts, but some drivers said the features aren’t enough of an incentive to keep working.

Tesla is facing its second sexual harassment lawsuit this month. Erica Cloud, an assembly line worker, alleges a “hostile work environment” against women and “continuous and pervasive” sexual harassment in the company’s factory.

SenseTime is pushing its Hong Kong IPO. The Chinese AI company paused its public listing after the U.S. placed it on an investment blacklist.

Carolyn Everson is leaving Instacart at the end of the year. Everson has served as the company’s president for just three months.

Joe Inzerillo is joining SiriusXM as chief product and technology officer. Inzerillo played a big role in launching Disney+ while he was at Disney as EVP and CTO.

Inside the Xbox

Twenty years after its release, the Xbox continues to change the world of gaming. It’s perhaps one of the industry’s least likely success stories, but did you know that the Xbox almost didn’t get made? A six-part series called “Power On: The Story of Xbox,” out today, offers a glimpse into the history of one of the most important gaming consoles of our time.

It includes dozens of interviews with people who played big roles in the making of the console, giving gamers and nongamers alike some insight into how hard it is to build something so iconic — even when you’re as big as Microsoft.

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