Amazon collapse The proposed deal to acquire iRobot highlights how important the IPO market has become this year. As governments tighten the noose on big tech companies trying to buy smaller companies, a major exit route for startups may be closed in the near term.
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If mergers and acquisitions are more difficult to execute, especially for big tech companies that sometimes prefer to buy new technology rather than build it, then unicorns and other late-stage startups will have precious few paths to liquidity available to them except by offering… Its shares are available for public subscription. This fact makes Reddit feel its IPO valuation is even more important. What could help tech companies avoid another 2023 (a year that saw only a few public debuts) is a huge, winning public offering.
To achieve this, Reddit needs to price its offers very carefully. The price is too low, and any positive trading results that follow it can be described as artificial rather than material. Too high, and the stock may lose ground from its IPO price.
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Image credits: Nigel Sussman (Opens in a new window)
But private tech companies want good IPO news, and public market investors won’t gain confidence if Reddit removes the bar it has set too low. However, if the price is too high, Reddit’s post-IPO performance could scare away companies if they can’t keep up. We saw last year how much post-IPO trading performance influenced other companies’ decisions to go public — when Instacart failed to sustain gains after pricing at $30 a share, other tech companies took notice. Today, Instacart is worth just over $25 per share.