Business

Unicorn ends badly as Justworks is delaying the IPO citing “market conditions”

Justworks, loc Venture capital Software startup focusing on the HR market for small and medium-sized companies announced today that it is postponing its IPO. In a statement to TechCrunch, Justworks said it “had decided to postpone its IPO due to market conditions at this point”.

Delaying the IPO is just that, a pushed back public debut. However, Justworks’ decision to temporarily suspend its public offering follows the rapid depreciation of recent technology debuts that used traditional IPOs, SPACs and direct listings. Additionally, Justworks’ now delayed initial public offering follows a sell-off in the value of software and technology stocks in general.

Is there anything bigger afoot than stumbling upon a company?

Read the tea leaves

Justworks’ initial public offering delay is the latest data point in a potentially deteriorating unicorns exit market. Otherwise we wouldn’t make a fuss.

Why? When a private company wants to go public, it sometimes finds that public market investors are unwilling to buy its shares at the price they intend. If the IPO hopefuls take more time, they can clean up their numbers and perhaps respond directly to some of their critics with results or business optimizations. Once the company has optimized its performance and image, it can try to float again.

Such a private-public segregation can be due to a gap between a company’s results, its valuation and the opinion of the public market regarding the company in question. Alternatively, a similar discrepancy may result from the fact that public markets are simply on a different side than private markets in terms of valuations. We read the Justworks News that it is probably at least the latter and maybe the former as well.

The possibility of a gap between the valuation of growth-oriented tech companies by private investors and the stock market’s valuation of those companies is significant as many highly-rated tech startups face an exit in the coming year. Bad news for these companies as a number of factors likely made timing the Justworks IPO difficult, suggesting that in today’s investment climate, other unicorns may also struggle to get out.

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