Survey: the already weak tech IPO market looks even weaker in 2016

Contact: Brenon Daly

Despite 2015 being one of the weakest markets for tech IPOs in recent years, respondents to the M&A Leaders’ Survey from 451 Research and Morrison & Foerster don’t expect a rebound in 2016. (See our full report on the survey.) In fact, more than four out of 10 (43%) forecast a further slowdown in public offerings next year, compared with three out of ten (29%) expecting a pickup in IPO activity. That’s a direct reversal of the already weak sentiment from the previous survey just last April.

By our count, only a half dozen enterprise tech companies have come to market on US exchanges so far this year. More alarmingly, the companies that have made it public in 2015 have continued to get roughed up on Wall Street. Half of this year’s debutants (Box, Apigee and Xactly) are currently trading below the valuations that venture investors put on them. (Similarly, Good Technology abandoned its yearlong effort to go public and instead took a relatively low-multiple sale in September that valued it at less than private-market investors had in previous funding rounds.)

With the IPO market likely to be an unwelcoming place in 2016, a dispiritingly painful reception could be waiting for those late-stage companies aiming to raise capital once again in the private market rather than on Wall Street, according to our survey respondents. A staggering seven out of 10 anticipate that the valuations of late-stage funding will decline next year, compared with just 5% who project up-rounds. Another way to view the incredibly bearish forecast from our survey respondents is that for every one person from the tech M&A community who expects the privately held high-fliers to continuing soaring to higher valuations, 14 respondents predict gravity to set in.

See our full report on the survey results, which includes the outlook for IPOs as well as a near-term forecast for M&A activity and valuations.

IPO market outlook

Survey date Forecast increase Stay the same Forecast decline
October 2015 29% 28% 43%
April 2015 41% 32% 27%

Source: M&A Leaders’ Survey from 451 Research / Morrison & Foerster