Tools & Data
Average Tech Company Post-IPO Returns
The majority of technology companies decline in value after going public
Post-IPO, the Odds Are Still (Unfortunately) Against You
If you're a tech employee, your company having an IPO is usually a very celebratory event (and also raises many important planning questions). As you develop your IPO/Going Public plan, one of the key questions to know/understand is how you anticipate the company will perform financially post-IPO.
The reality is there is absolutely no way to know! Public markets are highly liquid with millions of buyers/sellers. This makes the market "efficient", and also makes trying to pick which stocks will over/under perform a losing game (this has been analyzed at nauseam and for all intents and purposes is "proven").
More Than 70% of Tech Companies Underperform Post-IPO
Just like we provided data regarding how pre-IPO technology companies financially perform (to help improve decision making), post-IPO there is robust data detailing how technology companies' stock price performs after going public. And, unfortunately, its more of the same story: most tech companies underperform post-IPO. The economic research team over at Nasdaq has done a phenomenal job analyzing the data --> and we've provided below the two most insightful charts from their analysis.
Source: https://www.nasdaq.com/articles/what-happens-to-ipos-over-the-long-run-2021-04-15
A Similar Dynamic Exists Across Industries
The above dynamic shows (1) an attractive overall return for the total group of companies, (2) but that the return profile is driven by top-decile performers, (3) with the majority of companies actually underperforming -> is not actually unique to the tech industry. Rather, it exists across across most industries over time. For more information, see Single Company Stock Performance In S&P 500.
How to Use Post-IPO Returns Data in Your Financial Plan
If your company recently went public, you're likely focused on designing your selling/divestment plan. And as you do so, you may also be using our simple (but powerful) framework to value your company. As you estimate/consider what the probabilities are for each type of financial outcome, this data should help you better understand what high, low, and median range of outcomes could plausibly be.
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