You Thought 2021 Was a Big VC Year? Ha! | Chief Investment Officer

For venture capital investors in companies going public, 2021 was—to quote Ol’ Blue Eyes—a very good year. And even though the Frank Sinatra song has a somewhat mournful, mortality-themed ending, 2022 may turn out even better than last year.

That’s because a plethora of venture capital (VC)-backed companies are primed for an initial public offering (IPO) this year, according to a PitchBook study.

Robust IPO activity for venture-supported businesses has many possible catalysts, but the sheer volume of them at the moment is the main reason, meaning a critical mass of investors is eager for a payday. “There’s an abundance of IPO-ready companies, thanks to a decade-long buildup of venture-backed startups,” the report stated.

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Almost 700 US VC-backed companies are on the list, more than triple the number of domestic VC IPO deals in 2021. And the current crop’s median value, around $630.8 million, is almost the same as the lush numbers that venture companies fetched when debuting their stock last year, the research firm said.

Overall, some 1,200 companies went public in the US last year, raising $306 billion—both volumes are record setters. Overall, the IPO total (both VC and other-funded companies) doubled in 2021, raking in $523 billion. VC firms’ yearly capital investment is more than $150 billion, and they have raised some $110 billion over the past year, PitchBook data show.

“Eventually all that money that comes in has to come out,” said Cameron Stanfill, a PitchBook venture analyst quoted in the study.

Another factor favoring VC IPOs: less competition. Given the high valuations on many of these VC-birthed companies, few large corporations have the wherewithal to acquire them, the report found. That leaves an IPO as the best alternative as an investor exit, the study reasoned. “And as investors’ portfolios swell with these high-value holdings, they face increased pressure to secure an exit that returns value” to limited partners, the report indicated.

Perhaps the largest VC-backed company expected to go public this year is Stripe, the digital payments company that PitchBook estimates is worth $95 billion. Its co-founder has announced that the company is happy to stay private, but many are skeptical. Others aren’t so reticent. Large VC-hatched outfits that have said they will do an IPO this year include social media platform Reddit and yogurt maker Chobani.

Certainly, going public is a tricky endeavor. Numerous promising companies too often fail to capture the market’s imagination. Renaissance Capital calculates that only half of 2021 IPOs ended the year above their offering price. Prime example: shares in VC-launched Robinhood Markets, the buzzy trading platform, are changing hands at 42% of its $38 offering price last year.

The recent jump in inflation is also a problem for many IPOs, especially those in the tech realm.

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Tags: Chobani, IPO, PitchBook, Reddit, Renaissance Capital, Robinhood Markets, Stripe, VC, Venture Capital

New York State Comptroller Thomas DiNapoli, who is also trustee of the $267.8 billion New York State Common Retirement Fund, has filed shareholder proposals with seven companies asking them to comprehensively disclose their political spending.

The proposals are asking the companies to publicly report monetary and nonmonetary contributions and expenditures to any campaign for or against a candidate, or to influence the public with respect to an election or referendum.

“Corporate accountability is a priority for our pension fund,” DiNapoli said in a statement. “In the current climate, with our democracy itself under attack, corporations have to question whether any spending on political causes is in shareholders’ interests.”

The companies the fund is targeting are social media platform Twitter, satellite TV operator DISH Network, insurance firm The Progressive Corp., cruise line operator Royal Caribbean Cruises, hotel and casino operator Las Vegas Sands, beauty store chain Ulta Beauty, and internet company VeriSign Inc.

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DiNapoli said a shareholder resolution filed with Hanesbrands Inc. has been withdrawn after the clothing company agreed to disclose in an annual report all of its political spending, including payments to trade associations and other tax-exempt organizations that could be used for electoral purposes.

“I commend Hanesbrands for taking this step toward transparency,” DiNapoli said.

According to the 2021 CPA-Zicklin Index of Corporate Political Disclosure and Accountability, which gauges companies’ transparency regarding political spending, Twitter, DISH Network, and VeriSign registered a score of 0 out of 100 in the index, where 0 is the least transparent possible and 100 is the most transparent. Ulta Beauty scored an 8.6, while Royal Caribbean and Las Vegas Sands registered scores of 24.3 and 28.6, respectively. Progressive had the highest rating among the companies with a score of 40. And before it agreed to improve its disclosure, Hanesbrands had a score 7.1 on the index. All of the companies’ scores fall well below the average score of 54.1 among all S&P 500 companies.

According to the comptroller’s office, DiNapoli was successful with all five political spending disclosure shareholder proposals he filed in 2021. Those were filed with CMS Energy Corporation, Molson Coors Beverage, FirstEnergy Corp., Duke Energy Corp., and Royal Caribbean Cruises. He also said he sent letters to 16 other companies in September asking for political spending disclosure, including letters to Dollar General Corporation, Nasdaq Inc., and Textron Inc. He added that the pension fund is currently engaging with the companies and that he expects to report additional political spending disclosure agreements in the coming weeks.

DiNapoli said that since a 2010 US Supreme Court decision struck down certain restraints on corporate political spending, he has made it a priority to get more information on the political spending habits of the companies the state pension fund invests in. According to the state comptroller’s office, DiNapoli has filed 169 shareholder proposals on political spending disclosure in that time, and 49 major corporations have adopted or agreed to adopt such disclosures since 2010.