Wall Street

Tech titans line up: The leading companies ready for blockbuster IPOs in 2024

2023 was a particularly weak year in terms of IPOs, with only 148 new companies arriving on Wall Street. But the market estimates that 2024 will see a recovery in the field and that huge IPOs are coming. There are also Israeli companies among the candidates to join the club

Since the beginning of the year, the leading indices on Wall Street have shown dreamlike returns, with a 37% jump in the Nasdaq and a 20% increase in the S&P 500. A significant portion of the gains were recorded during November, when the opening shot of the traditional year-end rally was fired.
Thus, Nasdaq jumped by 6% last month and the S&P 500 added 5.4%. However, even though 2023 will be remembered as one of the strongest years on Wall Street, the number of initial public offerings throughout it was minimal, even lower than 2022.
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וול סטריט בורסה ניו יורק
וול סטריט בורסה ניו יורק
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So far, only 148 IPOs have been completed this year, a 15% decrease compared to 2022, which was one of the weakest years on Wall Street and included double-digit declines in the indexes. For comparison, and if you exclude a crazy year like 2021, in which more than 1,000 companies were issued in New York, in 2019 only 232 companies issued and in 2020 the number was 480.
The point is that even the number 148 does not completely reflect reality, since most of the IPOs in 2023 were small, with a few exceptions, such as the chip giant ARM and the veteran shoe manufacturer Birkenstock. Even the Israeli company Oddity (which owns IL Makiage), which was issued at a value of $2 billion, is considered one of the biggest IPOs of the year. It should be noted that most of the companies that nevertheless managed to enter the public market, did not generate impressive returns and more than half of them generated negative returns.
Estimate: The IPO logjam will break in 2024
The general assessment is that in light of the good performance of the stock market in 2023 and the positive expectations for 2024, during which the interest rate in the U.S. should begin to fall, the logjam will also break. This time, huge IPOs worth tens of billions of dollars should also arrive on Wall Street, some of whom have already started the process, including the Chinese retail giant Shein, which last week submitted a draft prospectus for an IPO at a value of $80-$90 billion.
Fintech startup Stripe, which has enjoyed high valuations for years, is expected to go public after it, and may issue at a value of $50 billion. Another leading candidate to reach Wall Street is Databricks, the analytics and artificial intelligence company, which recently completed a funding round from Nvidia at a $43 billion valuation. On the occasion of the preparations for a resurgence of the IPO market, CB Insights, the platform for collecting information on technology companies, mapped 257 companies that are the leading candidates from the point of view of the analysts to become public.
Along with the big names, 12 Israeli high-tech companies were also included in the list. Some of them, such as Redis or Yotpo, were actively preparing for an IPO as early as 2022, but had to postpone the plans in light of the collapse in technology stocks. Some of them, like Bringg or Elementor, are surprising names on the list. CB Insights points out that the decision to include a company in the list does not necessarily stem from the company's intentions or statements, but from an analysis of various signals and information: from the company's history to its need for financing, the recruitment of senior executives for positions related to finances, and perhaps most of all - the identity of its investors. Thus, for example, hiring CFOs with experience in public companies is definitely a signal regarding intentions to go public. Also, the presence of more "stressed" investors among the shareholders in the companies may also lead to a push for an IPO.
For example, entities like Tiger Global and SoftBank, which were among the most active investors in 2020 and 2021 and showered money on high-tech companies, caused heavy losses for their investors in the last two years and urgently need exits and good news. An IPO on Wall Street certainly meets the requirement, therefore every fifth company on the list is a company in which Tiger Global is invested. Another significant factor that could result in more technology IPOs in 2024 is the drying up of the capital available to funds that specialize in late-stage investments.
Although the capital raising crisis for startups did not pass over any market and any sector, throughout 2022 and 2023 it was clear that there was a greater willingness to inject capital into young companies than mature companies. There were several reasons for this, starting with the fact that a young company requires a lower investment, but mainly because a market failure had occurred, with unicorns reaching inflated valuations. At first, the big companies tried to avoid fundraising in order not to absorb a reduction in value, but by the time they realized that they needed money, the investors were no longer interested.
According to the research company PitchBook, during 2023 the demand for capital from these companies was almost three times higher than the supply. Institutional entities that have withdrawn from investments in unicorns, in light of the losses they suffered on the Nasdaq, are responsible for this decline. In the first half of 2023, more than 10% of the funding rounds in growth companies were made at a lower value than in the funding rounds that preceded them. Therefore, for the largest companies the best option for the next funding round may be the stock market, even if they have to compromise on value.
CB Insights points out that they did not necessarily try to map the best companies, or those with the potential to generate the highest return for investors, but the companies that have the most signals and forces that push for an IPO. Among the Israeli companies that appear on the list, the common answer to the question of whether they are indeed planning an IPO in the next 12 months is negative or evasive. Two prominent Israeli companies that are talking about an IPO - Shlomo Kramer's Cato Networks and eToro, which almost went public through a merger with a SPAC in 2021 - are absent from the list.
Signals before yield
So who are the Israeli candidates to join Wall Street in the coming year? The two most surprising names on the list are Bringg and Elementor. Bringg is a veteran company that became a unicorn in 2021. It is not one of the largest companies in Israeli high-tech, but its field of activity in managing shipping solutions for e-commerce makes it relevant in the market that is set to open with the IPO of the online retail giant Shein.
Another interesting name is Elementor, one of the few companies on the list with a value of under a billion dollars, which developed a platform for building open source websites. Elementor experienced a difficult year, with more than 10% of its employees laid off in the past year. However, this move, along with growth, is believed to have moved Elementor to profitability, potentially bringing it closer to the public market.
The next two are Redis and Yotpo, two companies that already started the IPO process at the end of 2021, but missed the opportunity. Redis, which specializes in database management, was then aiming for a value of $4-5 billion, and was already working with investment banks. Redis completed its last funding round at a value of $2 billion back in 2021 led by Tiger Global.
Yotpo has also already eyed the Nasdaq at a value of $2-2.5 billion, but did not have time to complete the move. Since then, the company that developed a platform for marketing and e-commerce that has been running since 2011, has fired 9% of its employees. Two more companies in Yotpo’s "old" category are Tipalti and AppsFlyer, which makes them natural candidates to move to the next stage. The fintech company Tipalti is among the Israeli companies with the highest value, $8.3 billion in its latest funding round, which was carried out in December 2021.
In addition, Tipalti is run almost like a public company, with executives such as CFOs and regulation experts. AppsFlyer, which developed technology for monitoring applications, already employs around 1,500 people, but has not completed a significant funding round since 2020. Forter, which deals with fraud detection in e-commerce, also apparently was ready to issue on Nasdaq, but it faces a major obstacle in the form of the value.
Forter's last fundraising, in May 2021, was done at a value of $3 billion, but one of its main competitors, the Israeli company Riskified, which managed to issue in July 2021 at a value of $3.3 billion, has fallen since then and is currently trading at a value of only $729 million, which also reflects on Forter and it will be difficult for it to go public at a value of more than $3 billion, which the investors would like to see.
A group of 'old' friends
The next cluster of Israeli companies consists of relatively old ones, all from the 2015 vintage with the highest value tags. These companies are the fintech company Rapyd, which a year ago received a value of $8.8 billion in a funding round and a value of $15 billion in secondary transactions, making it the most valuable private high-tech company in Israel.
It is followed by Navan, formerly TripActions, which completed a funding round at a $9.2 billion valuation a year ago. At the same time, it was announced that the company, which deals with business travel management, had already submitted a confidential prospectus for an IPO at a value of $12 billion. The plan will not be implemented in 2023, but if this scenario materializes in 2024, it will be the largest Israeli IPO to date. Next in line is the cyber company Snyk, which was valued at one time at $8.5 billion, but has since conducted rounds of layoffs and raised funding at a lower value, of $7.4 billion.
A secondary deal made in the company last summer revealed a further drop in value towards $4 billion, so apparently Snyk has no reason to rush to an IPO, but on the other hand Tiger Global is also on its list of investors. Gong, which developed a platform for managing marketing systems, rounds out the largest cluster of unicorns. Gong raised $250 million in 2021 at a valuation of $7.2 billion, when the company's founder and CEO Amit Bendov noted at the time that it had money for 40 years.