Private companies, especially technology startups that have spent the past few years raising big rounds at eye-popping valuations in anticipation of IPOs have put those plans on the back burner. Not one venture capital-backed tech startup valued at $1 billion or more -- a unicorn -- has gone public in the US this year, according to data provider PitchBook.

For the first time in five years, newly public companies that haven’t turned a profit based on earnings before interest, taxes, depreciation and amortization -- a group dominated by those high-growth tech firms -- are underperforming their more staid, money-making counterparts as investors shift their money to cash flow over growth, said Lear Beyer and Craig McCracken, co-heads of ECM at Wells Fargo & Co., citing the firm’s research.

Filing Backlog
Meanwhile, the backlog of companies that have filed with the US Securities and Exchange Commission in the past year for IPOs has grown to 185. That doesn’t include startups that submitted their plans without making them public yet.

Instacart Inc., which filed confidential listing documents with the US Securities and Exchange in May, slashed its private valuation by 40% ahead of the long-awaited IPO. Its value fell to $24 billion in March, down from the $39 billion it reached in a March 2021 funding round.

Instacart is now looking to brave the IPO markets as soon as the window reopens, which isn’t expected to happen before September, said a person familiar with the company’s plans.

Other venture-backed companies awaiting that opening include Reddit Inc., Stripe Inc. and Discord Inc., said people familiar with each of the companies’ plans who asked not to be identified because the information was private. Industrywide concerns about online advertising revenue have added to Reddit’s skittishness, one of the people said. Representatives for those companies declined to comment on their plans.

For the startups having cash on hand from earlier funding rounds could help them survive until the outlook changes, even if their valuations might not translate to public markets anytime soon.

“We expect the equity markets will likely stay volatile for some period,” said David Ludwig, global head of ECM at Goldman Sachs Group Inc.

Block Trades
The IPO freeze is extending into block trades as well, another business traditionally lucrative for investment banks.

Financial sponsors with stakes in companies that have gone public are less inclined to sell their holdings in the lackluster public market. Some have opted to transfer stock to their investors, or so-called limited partners, instead of returning cash after a block trade.