As Compass downsizes its IPO, signs of weakness appear for high-growth companies

On the same day that Deliveroo’s IPO

fizzled at the start of trading

, Compass announced via a fresh S-1 filing

that it will reduce the number of shares in its impending flotation and sell them at a lower price.

Taken together, the various market signs could point to a modest to moderate cooling in the tech IPO market.

The move by Compass, a venture-backed residential brokerage, to lower its implied public-market valuation and sell fewer shares is a rebuke of the company’s earlier optimism regarding its valuation and ability to raise capital. The company’s IPO is still slated to generate as much as a half-billion dollars, so it can hardly be called a failure if it executes at its rejiggered price range, but the cuts matter.

Especially when we consider several other factors. The

Deliveroo IPO

, as discussed this morning, was impacted by more than mere economics. And there are questions regarding how interested seemingly more conservative countries’ stock exchanges will prove in growth-oriented, unprofitable companies.

But added to the mix are

recent declines

in the valuation of public software companies, effectively repricing the value of high-margin, recurring revenue. The reasons behind that particular change are several, but may include a rotation by public investors into other asset categories, or an air-letting from a sector that may have enjoyed some valuation inflation in the last year.

Discord’s reported $10B exit; Compass and Intermedia Cloud Communications set IPO price ranges

In that vein, SMB cloud provider DigitalOcean’s

own post-IPO declines

from its offering price

are a bit more understandable, as is a lack of a higher price interval from Kaltura, a video-focused software company, as it looks to list

.

Taken together, the various market signs could point to a modest to moderate cooling in the tech IPO market. For a host of companies looking to debut via a SPAC, that could prove to be bad news.