Citigroup Sees Bigger IPOs as Private Deals Bulk Up Valuations
(Bloomberg) — A wave of big initial public offerings is building as emerging growth companies stay private for longer and bulk up their valuations through secondary stock sales.
“I don’t know if it’s here forever, but I think you are winding up a coil,” said John Collmer, global head of private placements at Citigroup Inc. “You are creating this massive backlog of quality companies that will go public.”
The shift is being bolstered by institutional investors who are increasingly eager to invest in late-stage companies that could go public in the next three years, Collmer said in an interview on the sidelines of the bank’s Private Company Growth Conference in New York this week.
This explains why private placements are on the rise in 2025 following a slump that began in 2022 when the Federal Reserve raised interest rates. As developing technologies become increasingly prominent, investors are scurrying for exposure to those sectors that aren’t well represented in public markets — yet.
“Fifteen years ago, people wanted to invest in Uber because you couldn’t get it in the public market,” Collmer said. “Today they are looking for the artificial intelligence, robotics and defense technologies companies that they can’t get in the public market. They tend to be big industries that are being disrupted and the disruptors are in the private market.”
Take for instance Elon Musk’s SpaceX, along with OpenAI, Stripe and Databricks Inc., all of which have turned to private secondary sales to provide liquidity to investors, including employees. That market has expanded to around $60 billion, up from $50 billion last year, according to a report released by research firm Pitchbook last month.
New York-based Ramp Business Corp. recently revealed that new and existing investors had purchased $150 million of shares from employees and early investors at a price valuing the fintech startup at $13 billion.
Despite the growth in private secondary sales, companies will eventually see the benefit of going public, according to Cully Davis, Citigroup’s head of growth equity.
Davis said there’s at least one sign that there could be an uptick in the number of growth IPOs: A flurry of publicly traded tech companies, including some new ones, are selling zero-coupon convertible bonds to raise money.
“When that market starts to open up, and it has opened up dramatically in the last month and a half, those are really positive signals,” he added.
From an M&A perspective, an IPO also has its advantages.
“It’s quite helpful for a company to have a legitimate publicly traded security that is liquid and that is independently valued and allows them to pursue acquisitions with confidence and with a currency that has real value,” he said.
Kore.ai, which is a Citigroup client, is focused on growth for now while keeping its options open. The AI software firm was valued at nearly $800 million in 2023 after a capital infusion of $150 million from a group of investors that include Nvidia Corp.
“We are figuring out what’s the right path of growth, whether it’s through an incremental acquisition or, at the right point, looking at an IPO,” said DK Sharma, Kore.ai’s chief operating officer. “But right now, we’re focused on getting the appropriate muscles for growing big time on top of our momentum today.
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