American companies just aren’t going public like they used to.
Only 49 companies headquartered in the US had completed public offerings through the third quarter, raising a combined $7.2 billion, according to data recently released by venture-capital research firm PitchBook. That’s a sharp decline from the same time last year, when 95 US companies had gone public, raising about $15 billion. This year is on track to be the worst year for US IPOs—in terms of both number of offerings and capital raised—since 2009, when the country was still emerging from recession.
PitchBook’s data looks at companies in both private equity and venture capital portfolios. Within PE, there have been 18 IPOs so far this year, which raised about $5 billion, the most sluggish performance on both counts since 2008. “Many managers continue to take advantage of strategic acquirers hungry to purchase growth rather than build organically,” Nizar Tarhuni, a PitchBook analyst, writes.
In the VC space, which includes most tech startups, companies are choosing to remain private even though funding has become harder to come by in 2016. Zero internet or tech companies went public on US exchanges in the first quarter of this year—something unseen since the same period during 2009.
Of the 31 VC-backed companies that have listed in 2016, only two were “unicorns” (Silicon Valley slang for a startup valued at $1 billion or more). Staying private is a strikingly common approach among the world’s richest startups, of which 96 are in the billion-dollar club, according to VC research firm CB Insights. Travis Kalanick, CEO of Uber, said this summer that the $68 billion company would IPO “as late as humanly possible.” WeWork, a company that manages shared offices and apartment complexes, was rumored in late 2014 to be eyeing an IPO for 2016 or 2017, but didn’t mention any such plans this year even as it raised money at a $16 billion valuation. When the Wall Street Journal reported last month that Snap, the newly named Snapchat, was planning an IPO for 2017, it felt like an anomaly.
While remaining private might be easier for startups like Uber that are flush with funds and interested in keeping their books closed, the choice can be frustrating to employees and other shareholders waiting for a payday. Airbnb, the world’s fourth most valuable startup, reportedly planned an employee stock sale this summer to help workers cash out in the absence of an IPO. Other startup employees are turning to private marketplaces for a chance to buy and sell their shares.
Meanwhile, venture capitalists are sitting on huge piles of cash and on track to raise the most money in 2016 since the dot-com bubble of the early 2000s.