Is the IPO dry spell in tech finally over? Not so fast.

On the face of it, the news of SoftBank-backed Arm's reported September IPO seemed like it could provide relief to the slumping tech IPO market.

But experts say Arm, a chip design company that's seeking a public valuation between $60 billion and $70 billion, is a special case, not the harbinger of a new boom.

"I don't think this is going to be the straw that opens the floodgates of IPOs," PitchBook VC analyst Kyle Stanford told Yahoo Finance. "Arm is massive, and AI and semiconductors are top of mind for everyone in the market from VC investors to retail investors. Arm is profitable, generating billions in revenue. No VC-backed company is going to look at Arm and say, 'Oh, Arm did it.'"

While the tech IPO drought may be improving, don't expect a flood.

"As long as the stock market stays up — the Nasdaq is up quite a bit from last year’s lows — we will see more IPO activity, but it will be nowhere near 2021, which was the most active IPO market since 2000," said University of Florida professor Jay Ritter, a noted IPO expert.

After more than a year of stark near-silence, there has been some notable IPO activity recently, including the go-publics of fast-casual chain Cava (CAVA) and beauty tech company Oddity (ODD). The IPO of shoe company Birkenstock is also rapidly coming down the pike, expected in September.

However, none of these companies are VC-backed tech companies, and tech IPOs are historically unique for their emphasis on growth rather than profitability.

Ultimately, a VC-backed IPO "is kind of a different beast," Stanford said, adding: "Cava was great, but it's not a tech company. Oddity was also great, but they were profitable and not really a direct-to-consumer tech company."

'The gold rush mentality' ended in the reset of 2021'

2021 was a legendary year for IPOs, literally breaking records.

EY data shows that, globally in 2021, there were 2,388 IPOs that raised $453.3 billion. Those numbers were bolstered by a wave of tech IPOs, the most active sector for a go-public deal that year.

But things have changed in the past two years, including the tech sector.

"That boom two years ago had mature companies and was by far the largest boom for tech IPOs since the dot-com era," Ritter said. "However, that gold rush mentality ended in the reset of 2021."

That "reset" came at the hands of rate hikes, rising inflation in 2022, and an increasingly uncertain macroeconomic environment. In turn, tech companies responded by prioritizing efficiency and cost-cutting over solely focusing on growth.

"I think there’s still the growth drumbeat in tech, but it’s focused on sensible growth," Ritter said. "It will take some excesses in valuation to get a real boom going, and we’re still pretty far off from that."

If not Arm, what will get the tech IPO market moving again?

"Everyone is waiting on the Stripes and SpaceX's of the world, whether they're going to be the ones to go out or not," Stanford said. "But you can also go down the list of the 800 or so unicorns in the US and any one of those that are late-stage can go public."

"I think everyone is also waiting for Instacart but not necessarily because they're a great company, but to see what kind of business they've actually built after the pandemic," Stanford added.

In the end, a company will step forward and define the tech IPO market's next phase.

There may even be increasing pressure to go public as more time passes, according to John Chirico, Citi's US head of banking, capital markets, and advisory. Chirico believes IPO volume will return in early 2024.

"I don’t think it's going to be gangbusters for everyone, but there’s an enormous amount of companies that have been downsizing their plans to the point where investors are starting to be concerned that those companies are running the risk of destroying future value," Chirico told Yahoo Finance. "The strategic argument for being public at a lower valuation is going to get more compelling over the next few months to a year."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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