Are Startups’ Glory Days Over?

Could IPO now stand for “It’s Positively Over?”

The Wall Street Journal reported that a majority of companies are struggling (to put it politely) after having gone public last year. In fact, said the publication, of the 175 firms that bowed on the public markets in 2015, more than 70 percent are trading below their offering price. The average name is down 20 percent.

And of the 10 biggest IPOs last year, nine of them (yes, that’s right, 90 percent) are below their offering prices and are down 25 percent, on average. With markets down high single digits through the year, so far, as young as the year may be, the average investor (retail or institutional) is gun-shy about new issues. The reticence may extend beyond Wall Street to Silicon Valley, said WSJ. And several firms have become skittish themselves, said WSJ, as plans reached last year to bring themselves public have been shuttered for a 2016 market launch. There have been no IPOs in January and only four new listings this month — those all fell below their offering prices in short order.

In an interview with WSJ, Jill Ford, who heads the Credit Suisse group that oversees trading in U.S. issues, said: “There are a lot of private companies who might have thought they were going public in the next six months, but now that will likely be several months later. Everyone’s timeline has likely been pushed back a bit.” Now, the emphasis is on profitability for firms that have been getting venture or private equity investments. Investors are getting provisions in contracts that help them get additional shares (and thus ownership) in the event of drastic price declines after an IPO.