It’s been a quiet and bumpy year for IPOs, with many 2021 and 2020 hot issues now in a massive slump amid the bear market of 2022. Looking ahead to 2023, we’ve got an impressive lineup of firms (such as Stripe, Reddit, and Discord) slated to go live on the exchanges.
Undoubtedly, the appetite for new issues is likely to remain quite curbed with the Federal Reserve continuing to raise interest rates, tempering enthusiasm for hot growth companies lacking historical financial data.
With a recession also on the horizon, 2023 doesn’t seem like it’ll be a great year for red-hot tech IPOs. Indeed, 2021 would have been the perfect time to go live on the U.S. exchanges. Though 2021 levels of euphoria are unlikely, one shouldn’t write off the 2023 IPO lineup completely. There are exciting companies that can hold their own without having the Fed pivot from rate hikes to rate cuts.
It will be interesting to gauge the appetite for new issues as we move into the latter stages of this bear market. Though the initial “boom” out of the gate that IPOs tend to enjoy could be more muted, I still think investors should take their time to put in due diligence before making a commitment to buy on opening day at any price.
Buying without homework is just a bad idea, even if we’re poised to get little hints of the kind of IPO hype we saw in 2021.
Without further ado, let’s look at three IPOs to stash on your radar for 2023.
Stripe
Stripe is the biggest and, quite possibly, the most-anticipated IPO of 2023. The payment-processing giant is going into an environment that’s been hostile to fintech firms. Going public in 2023 will entail a lower valuation of around $74 billion, down from $95 billion. Indeed, the company slashed its internal valuation by 28%. The big cut could be deeper, though, if the tech sell-off drags into the new year and post-IPO.
Regardless, Stripe will be a much-followed hot issue, as its IPO has been a long-time coming. A few weeks ago, Stripe announced a 14% cut to its labor force. The company isn’t immune to the pressures squeezing the economy and could prove an extremely volatile name in 2023.
Like many other hyper-growth tech stocks, Stripe overhired when times were good and is looking to find a new equilibrium. Only time will tell if Stripe will be able to thrive post-IPO.
The tempered valuation and still-promising growth profile make for an interesting play. The firm’s move into Web3 is intriguing. However, with so much hype drained from the crypto markets, it’s unclear whether such efforts will re-capture the excitement of downbeat tech investors.
The meme stock boom may be over, but Reddit’s IPO could reignite the hype of the “degens” subscribed to WallStreetBets. Undoubtedly, we may see short-lived euphoric hype once shares of the social-media platform go live. However, I wouldn’t count on such a boom lasting, as high rates and economic pressures continue to weigh.
Reddit will have a wild IPO that could land in mid-2023. With an estimated $15 billion valuation and the hearts of meme-stock investors, I’d not at all be shocked if the issue is oversubscribed. Don’t count on Reddit or a slate of tech IPOs to spark a tech comeback, though.
Social media stocks have been under considerable pressure lately, with competition from all sides and tremendous macro headwinds weighing on ads. Still, Reddit is arguably one of the most popular of the batch, with the number of posts continuing to grow by double-digit percentage points.
Indeed, Reddit is a very different type of social-media play that can engage and educate better than some of its rivals. For that reason, Reddit seems to be one of the wider-moat offerings of the 2023 IPO slate.
Discord
Sticking with the social theme, we have video-game-centered messaging firm Discord, which could make a splash on the public markets in the new year.
The company seems to have less of a moat relative to Reddit. Microsoft’s (NASDAQ:MSFT) failed pursuit of Discord has the firm experimenting with Teams to take a bit of share away. Indeed, Discord would have been a fine addition to Microsoft’s Xbox gaming division.
As Microsoft targets its own version of Discord (called Communities), we’ll likely see fierce competition out of the gate when the Discord IPO goes live.
Like Reddit, Discord could boast a $15 billion valuation. Whether it holds after going live in a hostile market environment, though, is the big question.
