US IPO Weekly Winners & Losers

Next week’s ServiceTitan (Nasdaq: TTAN) may be the last major US IPO of 2024. The window is all but closed, though we’ll have a better sense on Monday/Tuesday.

Raising $480 million at a $5.6 billion market cap, ServiceTitan provides online software for service contractors (plumbers, electricians, HVAC) to manage their businesses. It has a decent growth rate and margins, but the valuation and technicals look like stronger selling points at IPO.

ServiceTitan is the year’s 7th VC-backed tech company to go public, up from 3 in 2023 and 1 in 2022. We expect this trend to further accelerate in 2025.

So why is it going public now?

Remember that valuation is the Big Thing driving companies to stay private longer. Downrounds don’t matter much to public investors (who cares if a VC overpaid?), but VC-backed companies still avoid them like the plague. Part of it is reputational, and part of it is personnel-related (employees aren't happy with underwater options), but the main reason is to maximize proceeds and minimize dilution to shareholders.

This is especially true with ServiceTitan. Even though the IPO midpoint of $54.50 is below the last round of $85, those private investors will be made whole via a “ratchet” provision. These were more common in 2016-2019 and went away during the boom times, but now ServiceTitan is the second big deal in a row after Pony AI with a full ratchet for last-round investors. They’re never publicized in press releases, but ratchets have made a comeback.

It sheds light onto why many tech unicorns have delayed IPOs: Ratchets motivate companies to hold out for as high a valuation as possible, to avoid giving away shares for free. However, ServiceTitan’s Series H round also guaranteed an 11% annual return, which has motivated it go public sooner.

Zooming out, this week the Fed said it was in no rush to cut rates, but markets are still expecting a rate cut later this month. The Renaissance IPO Index jumped +2.0% on soaring tech stocks, while the S&P 500 gained +1.0%. Three VC-backed tech IPOs from earlier this year topped the leaderboard, with data management platform Rubrik up +27.2% after crushing Q3 estimates. At the bottom, genetic data firm Tempus AI backpedaled -19.4%.