Will IPOs be back in 2024?

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By Fran García

The tech IPO scene in 2023 was not the best, with only three significant IPOs of tech companies. First, there was Instacart, well-known for its online grocery delivery service. Next, Klaviyo, a company that specializes in email marketing solutions, also decided to go public. Lastly, Arm, recognized for its semiconductor technology, joined the stock market. Overall, the year 2023 saw fewer IPOs than previous years.

The tech sector has faced valuation challenges, primarily influenced by rising interest rates. Unlike the boom years of 2020 and 2021, when companies enjoyed high revenue multiples, the recent economic landscape has painted a different picture. With interest rates climbing, public companies have seen their valuations shrink, as investors recalibrate their expectations in a more cautious financial environment.

The turning point may be on the horizon, though. In the latest Federal Reserve meeting, there was a clear indication of a potential shift in monetary policy. The Fed discussed the possibility of lowering interest rates in early 2024, a move that could significantly benefit technology companies. Lower interest rates would mean more investor interest in riskier assets. This shift in monetary policy could be the catalyst needed to fuel the IPO market in 2024.

Looking ahead, 2024 promises to be an exciting year for tech IPOs. Great companies may go public, including Shein, the biggest fast fashion e-commerce; Reddit, social media platform; Stripe, online payment processing; Starlink by SpaceX, satellite internet; Brex, business finance and management platform; and Rappi, one the biggest Latin American unicorns. The IPOs of these companies could provide a significant liquidity event for everyone in the ecosystem, from founders and employees to investors.

While 2023 was really slow for tech IPOs, the potential shift in monetary policy and the lineup of promising candidates for 2024 bring optimism. If interest rates do fall, we could witness a vibrant resurgence in the tech IPO scene. It would be great for the Latin American tech ecosystem to witness Rappi’s IPO. We are excited for what 2024 will bring.

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