Last year saw a peak in number of IPOs of corporate-backed emerging business, while the first half of 2019 hosted some much-awaited flotations like those of Uber, Lyft and Slack. We look at the broader picture for corporate-backed companies going public.
As there have been many large corporate-backed rounds ($100m and above) in recent years, it is logical to ask what proportion of the corporate-backed promising businesses venture (no pun intended) to go public and become exits for their backers. According to data provider PitchBook, 2018 registered 194 venture-backed initial public offerings (IPOs), worth a record $249.5bn. The latter figure is the highest registered since the peak of the Dot-com bubble in 2000, when $242bn were raised in over 2000 flotations.
What is the share of the corporate-backed businesses going public? According to our data from GCV Analytics, in 2018, we tracked 80 IPOs of corporate-backed businesses, where a total of $25.85bn in capital was raised. In comparison, this constitutes about 41% of all IPOs of venture-backed businesses, according to PitchBook’s figures, and roughly 10% of the total dollar value.
While this may seem reassuring at first as it implies corporates may not have a huge share in a potential economic bubble, it must be borne in mind that the share of IPOs by corporate-backed businesses was much lower in previous years (around 20-25%). Furthermore, public markets appear to be a source of liquidity for earlier investors in companies that are not yet registering positive cash flows from operations (one must look no further than Uber and Lyft that went public earlier this year). According to data of Empirical Research Partners, the number of loss-making companies quoting on US stock markets approaches a 30-year high, with the average company which goes public making a loss. For further analysis on the IPOs, trade sale exits and large rounds in the corporate venturing space, please read the following piece in our magazine.