As market tumbles, NC companies hit pause on going public (except for a big one)
Going public was historically popular in 2021. Last year saw a record number of companies file initial public offerings, or IPOs. This included North Carolina businesses like Krispy Kreme, Gambling.com, and the Durham-based biotech companies Humacyte and Bioventus.
But a quick glance at those businesses’ current stock prices shows why the great IPO rush is on pause. Humacyte went public in August of last year at $10 a share and is now trading around $3.50. Bioventus, which hit the market at $11 per share, today sells at $7.
Rising interest rates and inflation concerns have particularly battered tech stocks (the Nasdaq is down 14.5% this year), which has led private companies in the Triangle to reconsider any imminent plans to go public.
One such company is Pendo, a Raleigh-based startup that provides software to help companies better connect with their customers and employees. Pendo CEO Todd Olson had indicated Pendo could enter the IPO market in late 2022, but he recently acknowledged that this timeline is no longer in play.
“We’ll go public when we’re ready to go public, and when the markets bear it,” Olson told The News & Observer in August. “Right now, the markets aren’t bearing it, so it’s really not that much of a question. But when the markets open back up, and if we’re ready to go, that’s most likely a natural evolution for us as a business.”
Another Triangle startup with dreams of going public is Phononic, a Durham company that makes semiconductor chips for energy-efficient cooling systems. CEO Tony Atti said that while an IPO listing is still the goal, “decisions of this magnitude are never taken lightly, which does include macro-economic forces and market conditions.”
The number of IPO filings has plummeted this year. According to IPO Monitor, a public offering tracking database, only one North Carolina has filed for an IPO so far in 2022. The database shows overall public filings have fallen from more than 1,000 last year to less than 175 this year.
“Companies planning to do an IPO have one shot at it, and there is a lot of evidence that they try to time the market to go public when the stock market is doing well,” said Richard Warr, a finance professor at North Carolina State University. “Historically, we see lots of clustering of IPOs around these ‘hot market’ periods.”
SAS still committed to going public
Despite the market downturn, one of the Triangle’s most prominent companies says it’s still marching toward an IPO.
During a media briefing Tuesday, executives from SAS Institute, an analytic software provider that employs 4,000 people at its Cary headquarters, reiterated its plans to go public in 2024. “Obviously, we’re going to be sensitive to how the markets change, just to make sure the timing is right,” said Jay Upchurch, SAS’ chief information officer.
Upchurch highlighted the company’s longevity and profitability as factors making its decision to go public less reliant on market conditions. SAS has operated since 1976 and last year reported annual revenue of $3.2 billion.
In contrast to growth-minded startups like Pendo, which seek IPOs to raise additional capital, SAS is a larger, more mature company, which “should be more immune to shorter-term economic and market fluctuations,” said N.C. State’s Warr.
Warr suggested SAS may want a public listing to “diversify the ownership of the company.”
SAS’ majority owner is 79-year-old Jim Goodnight, one of the wealthiest men in the state. Last year, The Wall Street Journal reported Goodnight was exploring selling SAS to the California company Broadcom for up to $20 billion, though no deal was completed.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
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This story was originally published September 29, 2022 at 6:00 AM.
