Are tech companies scared of the big, bad public markets?

According to IPO Boutique’s records, just 100 companies hit the public markets in 2016. That figure does not includes SPACs, unit offerings or companies who currently trade on foreign exchanges.

But that number was significantly down from 2013, 2014 and 2015.

The Wall Street Journal’s Maureen Farrell addressed the issue and claimed a reason for the lack of IPOs is the lack of interest in answering to investors short-term itch, the ability to keep company secrets away from competitors and the ease of being funded privately by massive investment groups.

Farrell said groups are ‘showering’ private companies with cash.

It is true — especially in the tech sector. We’re talking the Ubers, AirBnbs, Palantirs, Pinterests, etc. of the world. Many see the growth of high-profile tech names and they want to buy in at any stage of private-funding. They are chasing the next Amazon. Here’s a list of the most active investors in private tech companies — at the top of the list is Andreessen Horowitz, the famed private equity firm of Marc Andreessen and Ben Horowitz

Don’t get it mixed up, many of the companies who are on the above list will have large gains. But this, in turn, is giving early investors and/or employees the opportunity to cash-in  without releasing a single document to the SEC.

In the technology industry, the private fundraising market now dwarfs its public counterpart. There were just 26 U.S.-listed technology IPOs last year, raising $4.3 billion, according to Dealogic. Meanwhile, private U.S. tech companies tapped the late-stage funding market 809 times last year, raising $19 billion, Dow Jones VentureSource’s data show.

Now here is where 2017 and beyond plays in.

These investors, who some strongly believe entered the game too late and are holding the bag, will eventually need to cash out. And the spot for that is the public American markets through an IPO.

Our take? There will be ‘bloody-red’ large funds from massive-valuation-shrinkage. Let the dust settle; let companies attempt to go public; choose with a fine-tooth comb which IPOs to invest in.

There will be many excellent companies who go public and investors should profit nicely. But beware of those hitting the public markets in distress with growth in the rear-view mirror and investors desperately looking to cash out.

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