"America's 'Star Unicorns': With Larger Private Funding, Why Still Go Public?"

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This year, the private fundraising activity of major U.S. startups has been much more active than IPOs.

According to Bloomberg and PitchBook data, as of November 4, there have been 21 private fundraising deals exceeding $1 billion, with a total amount of $108 billion; in comparison, there have only been 10 IPOs of the same scale, raising $13.3 billion.

Driven by artificial intelligence and aspiring tech giants, companies from OpenAI to Databricks have secured massive funding and high valuations in the private market. However, for investors, a core question remains: if the private market is so generous, why do these companies ultimately still go public?

The answer lies in timing and strategic choice. Chris Evdaimon, a private company investor at Baillie Gifford, stated that these companies "could go public tomorrow," but they choose to remain private so they can invest in loss-making businesses or make acquisitions without scrutiny from the public.

Nevertheless, bankers and investors generally believe these companies will eventually go public. The move is not just to time the market, but to maximize value by going public from a "position of strength" at the peak of their own development.

Why is IPO still the ultimate goal?

Currently, many startups prefer to remain private, in part because investors are willing to fund growth before they become profitable. Evdaimon pointed out, "Private markets are currently rewarding growth." In addition, the increasing non-public share sales also allow long-term backers and employees to cash out before an IPO, easing the pressure to go public.

Although it's flexible to raise funds in private markets, most believe these highly valued private companies will eventually go public. Evdaimon said they are merely choosing the best time so they can "maximize value from a position of strength."

Take OpenAI for example; the company’s recent restructuring is viewed as paving the way for an eventual public listing. Similarly, fintech company Klarna Group Plc went public in September this year, after twenty years since its founding.

How do companies perform after going public?

The performance of this year's major IPOs has been mixed. Data shows that while the weighted average return for these companies has reached 40%, outperforming the S&P 500 index, the share prices of 4 out of the 10 companies have fallen below their offering prices.

The overall strong performance has mainly been driven by a few companies such as stablecoin issuer Circle and CoreWeave.

Risk Reminder and DisclaimerThe market has risks and investment needs caution. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinion, viewpoint or conclusion in this article is suitable for their particular circumstances. Investments made accordingly are at one's own risk. ```