HR software group Justworks pulls IPO as tech stocks fall

Justworks, a human resources software company that was planning to list in a $260m initial public offering this week, has suspended the flotation in a sign of strains radiating from the recent sell-off in tech stocks.

The New York-based company was anticipated to complete a deal to join the Nasdaq on Wednesday evening that would have valued it at up to $2bn. But in a short statement on Wednesday morning, Justworks said it had “decided to delay its IPO due to market conditions at this time”.

The tech-heavy Nasdaq Composite index has fallen 4 per cent since the start of January, with newly listed companies particularly badly hit. The Renaissance IPO index, which tracks companies that have listed in the last two years, has fallen nearly 10 per cent this month.

The declines followed what had already been a difficult 2021 for IPOs despite robust gains in the broader stock market. Companies raised a record amount of cash through flotations last year, but many lost favour with investors after their listings.

Two-thirds of companies that completed IPOs in 2021 ended the year below their offering price. The Renaissance index had its worst year relative to the S&P 500 stock index since it was launched in 2009.

Bankers entered 2022 optimistic about the pipeline of new IPO candidates, but have warned of problems if the recent poor performance continues.

Speaking in late December, Jim Cooney, head of Americas equity capital markets at Bank of America, said: “It’s going to be important for the first handful of IPOs that get out of the gate to trade well because that will have an impact . . . investors are going to be very focused on deal size, valuation and share composition.”

Justworks’ delay follows a decision by Trajector, a benefits software company, to cancel its planned offering last week.

Authentic Brands, the owner of brands such as Forever 21 and Sports Illustrated, also officially withdrew its registration to list — two months after it took an investment from a consortium led by CVC Capital Partners.