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😥 What happened to that year-end IPO window?

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It’s good to be back for another issue. I’m out in Zadar, Croatia right now working, largely, West Coast hours for the next week or two. I love having my morning coffee in the Roman Forum while catching up on emails with no one to bother me. But this whole “staying-up-to-midnight-on-calls” is catching up to me. For you voluntary digital nomads: please send tips.

Today, I wanted to discuss the current situation with tech IPOs, including what to look forward to next year in 2024. Yes, we’ve seen a few already (which we wrote about), but the question is: where’s the rest?

Speaking of which…if you’re one of those employees whose company is gearing up to go public, my colleagues from our Wealth team are hosting a live session that could be helpful, and informative. Plus you can ask them all your questions, so you should definitely sign up. 😉

Alright, let’s jump in.

🫡 So long Q4 IPO window…we barely knew you

We’re sitting here in mid-November and the IPO window is largely shut for tech companies for the remainder of 2023. Perhaps it’s a good year to get the holiday decorations out early and allow the bankers to spend the holidays with their families this year.

All jokes aside, if you were one of the optimists about the Q4 IPO window, you can at least take solace in the fact that you weren’t alone.

So…what happened?

There was quite a bit of optimism that we’d see a handful of tech companies take the leap into the public markets in Q4. The window was briefly cracked open for Instacart and Klaviyo in September, but there were mixed signals from investors as they made their debut. Given the market slump in October and other macroeconomic factors, the remaining companies rumored to be going public in Q4 decided to pack it up for the winter.

I know — this sucks. All of us that work in tech or VC should be rooting for our peers and the IPO window to open. Put simply: IPOs help out the entire VC-backed tech ecosystem. Our optimism seems to have backfired yet again, and our two year struggle continues. But, there’s always next year right?

🫤 Will things be any different in 2024?

Here’s the good news. There are still a good amount of IPO-ready companies that are just waiting for the right time. And bankers and investors are expecting the IPO window to open back up in 2024 for a handful of those companies.

Now, the bad news. Interest rates are still high. The markets are still tough for tech. There are multiple brutal wars happening. And 2024 is an election year which, unfortunately, can cause a lot of anxiety for American citizens and the market.

But it’s also important to remember this: There’s never a perfect time to IPO. Yes, an election year can be an oft repeated reason for delaying an IPO decision, but there’s always something to worry about in national and global economics. The election may cause some uncertainty in the markets and short-term turbulence that affects who goes public and when, but markets tend to go up regardless of who is in the White House.

All that said, the expectation is that the tech IPO window will start cracking open in April and last through early summer. We may also get another window pre-election in September.

Many may not be banking on it, but there could also be another window after the election in November like there was in 2020. Of course, these are all plans and predictions, and who knows what 2024 will entail.

Yet again, let’s put our positive vibes together and hope that 2024 is a better year for IPOs.

But for you procrastinators out there, I do have some good news.

😏 The upside of a delayed IPO

If you own stock options or equity in one of those companies in the IPO backlog and you haven’t started planning yet, well…you just bought yourself another 6 months to finally start planning!

We’ve said it a million times in this newsletter, but we believe creating a plan for your equity gives yourself the best chance at a successful outcome. Through tax planning and taking the emotion out of the equation, you can help give yourself flexibility — both in your finances and in your career — to be successful once that IPO or exit does happen. By waiting until it happens, you may be forced into decisions you no longer have the luxury of making.

How so? Well, one big example is getting to long-term capital gains. To do so, you have to hold your exercised shares for at least one year. Most companies have a post-IPO 6-month lockup period before you can sell your shares. By creating a plan to start exercising now, you can start the clock on that 12 months, and hit it before the end of 2024, even if your company goes public in that spring window.

Plus, you can also play with 2023 and 2024 tax years. Have ISOs? You may be able to exercise a portion before January and not incur Alternative Minimum Tax (AMT).

But these are just a couple of potential strategies available to you. At the end of the day, it’ll depend on your personal situation — what applies to others may not apply to you — and that’s even more reason to start making a plan.

While we all mourn the IPO window-that-almost-was this year, there may just be a silver lining for you as we look forward to 2024. Just remember: IPOs will come back. Let’s just hope 2024 is our year.

Things we’re digging:

  • 🫵How do you actually start planning? A good place would be joining our Secfi Wealth leadership tomorrow (hint hint). Seriously, though, we believe it’s valuable knowledge to have and you’ll have the chance to ask them any questions you may have.
  • 🚪IPOs aren’t the only exit. Airbnb made their first acquisition since 2019 with a still-in-stealth-mode AI startup. While we all pray for IPOs to return, equity planning isn’t just for going public. It’s likely we’ll see increased M&A activity next year too, so it’s important to get ahead if you think that’s an option for your company.
  • 📈The markets got some good news. After a few rough weeks, stocks ripped higher after encouraging inflation data. Small cap stocks and small cap value stocks, in particular, led the charge, turning in their best 1-day performance this year.

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