Justworks, a corporate-backed software startup targeting the HR market for small and medium-sized businesses, announced earlier today that it would postpone its IPO. In a statement to BestFitnessBands, Justworks said it “decided to postpone its IPO due to market conditions at the moment.”
An IPO delay is just that, a public debut pushed back. But Justworks’ decision to temporarily suspend its public offering follows the rapid decline in the value of recent technology debuts using traditional IPOs, SPACs and direct listings. In fact, Justworks’ now-delayed IPO follows a sell-off in the value of software and technology stocks in general.
Is there anything bigger than stumbling one company?
Reading tea leaves
Justworks’ IPO slowdown is the latest data point in what could be a deteriorating unicorn exit market. Otherwise we wouldn’t be making a fuss.
Why? Sometimes, when a private company wants to go public, it finds that investors in the public market are not willing to buy its stock at the price it had in mind. By taking more time, the IPO hopeful can clean up its numbers, perhaps answering some of its critics right away with results or business adjustments. Once the company has aligned its performance and image, it can try to float again.
Such a private-public decoupling can arise from a gap between a company’s results, what it thinks they are worth, and the public market’s view of the particular company in question. Alternatively, a similar decoupling could arise because the public markets are simply on a different page regarding valuations than the private markets. What we’re reading from the Justworks news is that it probably addresses at least the latter issue, and maybe the former as well.
The possibility of a gap between how private investors value growth-oriented tech companies and how the stock market values these companies matters because of the number of highly valued tech startups that must find an exit in the coming year. Bad news for those companies: A number of factors likely made Justworks’ IPO timing difficult, suggesting that other unicorns might also struggle to get out of the current investment climate.