Home IPO Coronavirus Fears Could Put a Chill on Tech IPOs

Coronavirus Fears Could Put a Chill on Tech IPOs

by TradingETFs.com

The fast-moving coronavirus threat means challenging times for IPO hopefuls.

Anxiety over the continuing COVID-19 outbreak again roiled the markets on Thursday, with the Dow Jones closing 969.58 points lower, wiping out most of Wednesday’s gains, after the number of known U.S. cases rose and California declared a state of medical emergency.

Market volatility, and overall uncertainty around the impact of COVID-19 on the global economy, is putting a chill on dealmaking for now. And that includes companies aiming to go public this year.

“Companies that are on the IPO track, or at some stage of that track, are certainly spooked,” said David Makarechian, partner at O’Melveny & Myers and chair of the firm’s emerging technologies practice. “The general wisdom is that volatility is very detrimental to the IPO market.”

Coronavirus fears sent the stock market into correction territory last week, and since then, a mix of emergency rate cuts and election year developments have sent stocks on a roller coaster ride not seen since the 2008 financial crisis. On Thursday, the prominent venture capital firm Sequoia Capital was willing to draw the comparison, advising companies to prepare to rein in spending and extend their cash runways in the event of an extended decline in fundraising.

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