Crypto crash weighs on US IPOs as candidates push out timing

[NEW YORK] Returns from new US listings have waned considerably this quarter and the crypto crash has made recent initial public offerings (IPOs) in the sector among the biggest casualties, creating a higher bar for companies such as Grayscale Investments and BitGo Holdings to go public in the near future.

Shares of US IPOs raising more than US$50 million, excluding vehicles such as closed-end funds and blank checks, have fallen an average of 5.3 per cent this quarter, compared to the S&P 500 Index which is up 0.9 per cent. Of those, the five crypto companies that have gone public this year are down an average of 31 per cent in the quarter.

The performance raises the question of what kind of reception Grayscale, the crypto ETF provider which publicly filed for an IPO on Nov 13, and BitGo, the crypto infrastructure company which filed publicly on Sep 19, would receive in this environment, or newly listed companies in any sector, for that matter.

“Crypto will probably be the least favoured sector given investors have suffered a lot of losses,” said Josef Schuster, the founder of index provider IPOX Schuster.

Companies may not be forced to hold off from listing in December, but they may have to lower their pricing expectations, he said.

Crypto IPOs mixed

The crash in crypto prices that began in early October has stripped more than US$1 trillion from the value of digital assets, but even before then, reception for crypto IPOs had been mixed.

Shares in the Winklevoss twins’ crypto exchange Gemini Space Station fell 14 per cent from the US$28 IPO price struck in September to the end of the third quarter. EToro Group stock fared even worse, falling more than a fifth from the trading platform’s debut in May to Sep 30.

Those that were performing solidly prior to the crash were not spared from it. Shares of the Tom Farley-led institutional crypto exchange Bullish, which debuted in August, have pulled back 38 per cent since the start of October. Even the crypto-loving retail investors that stormed the early June IPO of stablecoin issuer Circle Internet Group have seen its share price roughly halve over the same period.

Those two firms, and blockchain-based credit company Figure Technology Solutions, are still trading above the marks where they went public.

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One positive of recent crypto volatility is that it has generated greater trading volumes, to the benefit of exchanges. The 14-day average trading volume in Bitcoin this month hit its highest level since March.

Bankers remain eager to get some more IPOs done in the narrow window between Thanksgiving and Christmas, but some have already thrown in the towel. John Foraker, the chief executive officer of Once Upon A Farm PBC, said in a LinkedIn post on Sunday that he had decided to postpone the kids food maker’s IPO until 2026, citing the government shutdown as having “got in the way”.

The immediate health of the IPO market, including the prospects for more crypto-related names, may depend on whether markets get a Santa Claus rally.

“If they are having trouble with their existing portfolios, investors are not going to get excited about something new unless it’s very unique,” said David Erickson, an adjunct professor of business at Columbia Business School.

All signs point to crypto being an IPO theme that bankers expect to resurface in 2026. Crypto trading platform Kraken revealed last week it had filed confidentially for an IPO.

“There’s been a backlog of companies building up for years,” said Kevin Moss, managing director and portfolio manager of the Private Shares Fund, which holds positions in 80 private or recently public growth companies. He sees a “coiled spring” of companies eyeing debuts next year, across a range of sectors.

“Short of something unthinkable happening, the plan is for a lot of these companies is to go out.” BLOOMBERG