A favorable IPO market has many private companies considering if the timing is right to go public. To explore evolving market trends and consider how companies can become transaction ready, Shawn Murphy, Managing Director, Head of Private Markets at Morgan Stanley at Work, sat down for a virtual discussion with Diana Doyle, Managing Director, Head of Technology Equity and Equity-Linked Capital Markets, Americas at Morgan Stanley, Erin Conolly, Executive Director, Issuer Strategy & Excellence at Morgan Stanley at Work, and Garrett Black, Head of Custom Research at PitchBook Data. Below is an overview of some of the topics covered:
IPO Trends and Market Dynamics
After a period of slowdown, IPO market activity has been picking up, with the number of deals on track to return to historical averages.1
“Many companies have had a longer tenure operating privately than in the past, and their years of preparation have paid off, with IPO candidates demonstrating stronger metrics than we’ve seen in a while,” Garrett Black noted.
This level of preparedness is sparking several IPO market trends, especially around employee liquidity. For instance:
- Issuers are increasingly providing employees with early liquidity, with releases that expire before the traditional 180-day lockup period.
- Many companies are offering employee stock purchase plans (ESPPs) on day one, enabling employees to capitalize on the IPO price and obtain shares at a discount.
- Silent shareholder programs are being extended to a wider base of employees, allowing them to sell their shares as part of the IPO offering.
Greater private company maturity is also contributing to more measured IPO timelines. Late-stage private companies that have access to today’s deep private market liquidity are often willing to put off going public until they can attract higher valuations or achieve core business milestones. As an added benefit, it also allows companies to demonstrate growth, profitability and a proven ability to execute, which may attract a premium from IPO investors.
This trend has created a type of public-private convergence, with private companies navigating volatility by planning for both private and public paths to liquidity in parallel.
Getting Transaction Ready
“Turbulent markets are a great reminder of the need for transactional readiness and what issuers can do now to prepare for a future event,” Erin Conolly said.
While companies can’t control market conditions, they can lay a foundation for success by:
- Preparing audited financials.
- Strengthening their management team and board.
- Refining their investor narrative.
- Meeting with potential IPO investors to educate them before going public.
“Most companies going public now have met with their top 25 IPO investors at least three times before the roadshow,” Diana Doyle explained. “That way, the roadshow can be used as a referendum around price rather than the first-time investors learn about the business.”
In shifting from private to public markets, issuers also need to consider their stock plan readiness. Some steps they can take include:
- Auditing and reconciling their cap table, awards data and other records that will roll up into their financial reporting.
- Upgrading their payroll, HR and equity systems if they cannot currently handle public market transactions.
- Educating employees and executives on changes to their equity structure. “Advance education is critical to prepare employees for their post-IPO financial futures,” Shawn Murphy stressed.
- Identifying stock plan administration resource gaps, particularly around international tax rules and compliance, and engaging with partners who can help close those gaps.
Growing adoption of AI tools can also enhance transaction readiness—and may attract greater market interest as well. While pure play AI companies have been garnering considerable attention, companies that successfully integrate AI into their operations may also capture investor interest, particularly if it helps drive solid long-term returns.
Thriving Post-IPO
“IPOs are similar to high school graduations,” Diana Doyle shared. “They’re a milestone and celebratory event, but the next day marks the start of adult life.”
Companies that thrive post-IPO are those prepared to hit the ground running. That means:
- Meeting (and potentially exceeding) the market expectations they’ve set, especially in their first few quarters.
- Maintaining ongoing and open investor relationships.
- Equipping management by engaging in mock earnings calls in advance.
- Aggregating the teams they need to execute as a public company well before going public.
It’s all part of the “hurry up and wait” scenario that rewards companies for laying a foundation for future growth as they navigate the journey from private to public markets.
For more insight into the latest IPO trends and market dynamics, watch the full virtual discussion.
