The hurdle for US initial public offerings remains hard to clear for closely held companies even as SpaceX, Anthropic PBC and OpenAI dominate headlines with their outsize stock-sale plans, said Jeffrey Perlman, chief executive officer of private equity firm Warburg Pincus.
“The IPO market remains structurally broken for sponsors, and we have 60% fewer public companies today than we did 10 years ago,” Perlman said in a Bloomberg Television interview Wednesday. “It’s not to say that there aren’t going to be any IPOs — there should still be IPOs.”
ChatGPT creator OpenAI this week became the latest artificial intelligence developer to confidentially file for a public listing, while SpaceX — known officially as Space Exploration Technologies Corp. — is preparing for an IPO that would value the company at about $1.8 trillion.
Still, most private equity investors looking for improved returns won’t be able to rely on IPOs, Perlman said, noting that more than 60% of Warburg’s exits in the past four years have been to strategic buyers. He said that many buyout firms will need to keep leaning on continuation vehicles, which let them roll assets into new funds.
“It’s not surprising that continuation funds, and we’ve told this to our investors, that’s going to still be a permanent feature of the market going forward,” he said.
The giant IPOs announced in recent weeks are likely to have another impact on the market, Perlman said. Adding SpaceX, OpenAI and Anthropic to funds mirroring stock indexes will require a reallocation of capital.
“The index is going to have to sell a bunch of other stock to go buy something that’s very, very large,” he said. “And you’re also going to have active money that also needs to free up capital to buy what is three very, very large IPOs.”