Silicon Valley start-ups revive listing plans as Arm reignites IPO market

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A group of Silicon Valley’s biggest private tech companies are dusting off long-delayed plans to list their shares, with the upcoming initial public offering of chip designer Arm set to provide a new gauge for market sentiment.

Grocery delivery group Instacart, software company Databricks and identity verification start-up Socure are among those considered candidates to launch stock market debuts by next year, according to people familiar with their thinking.

They would follow Arm’s blockbuster public offering, which is expected as soon as next month, according to people familiar with the plans.

That IPO provides an unusual test of investor thinking: the UK-based chip designer was public for 18 years before being taken private by SoftBank for £24bn in 2016. That should ease its passage back on to the public market, according to investors, but it also makes it harder for other start-ups to draw firm conclusions. 

Arm is among the first big tech companies to attempt an IPO in 18 months, with several well-funded start-ups such as Stripe having put off float plans during a turbulent period for public tech stocks.

Instacart could be among the first to follow with an IPO before the end of this year, according to two people close to the matter. It first filed its intention to list in New York last May, but delayed plans due to market conditions. 

The grocery delivery company’s valuation has plunged from a peak of $39bn in March 2021 to $12bn in May of this year, according to people with direct knowledge of the company’s financial details. It will make a decision depending on whether public markets stabilise later in the year, said the people.

Nasdaq, the New York exchange on which Arm plans to list, has in 2023 recovered the bulk of last year’s losses and investors are increasingly confident that a small number of start-ups that shelved plans to list in 2021 could soon revive them.

Josh Wolfe, co-founder of venture firm Lux Capital, said “a slim sliver of an IPO window” may open later this year. When it does, “singular, category defining companies . . . would be strong standalone public new listings”, he added. 

Databricks, which posted revenues of more than $1bn in June and acquired OpenAI competitor MosaicML for $1.3bn, is a candidate to IPO, according to Wolfe, who is one of its venture capital backers.

Databricks chief executive Ali Ghodsi has repeatedly stated his intention to take the company public but Databricks “won’t be the first out”, according to a person with knowledge of its plans. The company “will watch and see how [Arm’s IPO] goes,” they added.

The retrenchment of private investors over the past year has increased the urgency: US venture capital fundraising fell 59 per cent in the first six months of this year compared with the same period in 2022, and venture-backed exits plunged 79 per cent, according to Refinitiv data.

ID verification company Socure, which is valued at $4.5bn, hinted at an IPO in 2021 but pulled plans when the market soured. Socure this year secured a $95mn credit facility from JPMorgan, has hired a new chief financial officer with IPO experience and is preparing for an IPO as soon as next year, according to founder Johnny Ayers.

“You never want to be one of the first ones out, or you’re going to price at a pretty substantial discount because folks buying in are taking the risk,” said Ayers. But if “bellwether companies” such as payments group Stripe, Instacart or fintech start-up Chime have successful IPOs, then “you will see more companies line up quickly”, he added.

Investors are closely watching social media platforms Reddit and Discord, and travel business Navan. They all first mooted an IPO in 2021 or 2022 but were forced to delay plans due to markets turmoil. 

In March, car rental app Turo filed an update to its IPO paperwork, signalling that it had not given up on plans first made in 2021 to float. In May, data automation firm Klaviyo, last valued at $9.5bn, filed confidentially to list in New York — an early step to a flotation. 

Elon Musk’s SpaceX recently climbed to a valuation of nearly $150bn, making it among the world’s most highly valued private companies, although the Tesla chief executive has long refused to disclose whether he is planning to take the satellite business public.

Private companies hoping to go public in the weeks following Labor Day on September 4 — typically a busy IPO period — will need to file paperwork this month, meaning the coming week will probably give a clearer sense of appetite in the market and set the tone for the rest of the year.

But Stripe, long rumoured to be gearing up for an IPO, will not be making a move, according to a person familiar with the company’s thinking.

The payments company raised $6.5bn in a private stock sale earlier this year, at half of its peak valuation of $95bn. “There is no impetus” to test public markets this year, said the person.