The New Rules of the IPO

Is It the End of the IPO as We Know It?

Founders, companies, and investors are rebelling against the investment banks — and taking matters into their own hands

This story is part of The New Rules of the IPO, a multi-part special report.
Illustrations: James Clapham

By all accounts, 2019 was a terrific year for the stock market, with the Dow Jones Industrial Average rising by more than 22% and the S&P 500 up nearly 29%. But even as a broad range of businesses fared well in 2019, one specific category proved to be a decidedly mixed bag, and it was a surprising one at that: companies that were on the verge of going public.

Though the Renaissance IPO Index ended the year up 35%, beating the broader market, investors, underwriters, and entrepreneurs are left feeling walloped. That’s because a number of headline-grabbing misfires dampened enthusiasm for initial public offerings of stock. WeWork’s yanked IPO was the most high-profile example of trouble, but there are others. Endeavor, the sports, fashion, and talent conglomerate once valued at $7.8 billion, pulled its planned IPO due to a lack of support, as did Postmates, the delivery service, which is now said to be seeking a buyer.

Meanwhile, the companies that did make it out found the public-market terrain to be fairly brutal. Once-celebrated unicorns such as Uber, Lyft, Peloton, and Pinterest went public only to struggle to generate investor enthusiasm. And B2B player Zoom, the videoconferencing software company, which had a juicy pop of 72% on its first day of trading, has seen its fortunes seesaw, falling from a high of $102 to roughly $88 at press time, even as the broader market, especially the tech sector, has been on a tear. Even Saudi Aramco, the oil-and-gas colossus that went public in Riyadh on December 11 and instantly became the world’s most valuable company, is said to have fallen short of the Saudis’ expectations that it should be valued at $2 trillion.

It is unusual to have a year when the stock market did so well overall, while the market for private companies going public proved to be…