There's plenty of talk that some aging unicorns might go public next year, including Palantir, Airbnb and maybe Uber.
But if this market volatility continues into next year, they are either going to have to drop their prices dramatically, or postpone their IPOs.
Simply put, the recent after-market performance of initial public offerings has been terrible. In the last 90 days, IPO after-market returns, which are the returns retail investors get after the first day of trading, have been down an average of 5 percent, according to Renaissance Capital.
Of 55 IPOs in the last three months, about half are below their issue prices, including internet browser Opera (down 38 percent), speaker manufacturer Sonos (down 13 percent), real estate giant Cushman & Wakefield (down 4 percent) and lithium manufacturer Livent (down 4 percent). Recent Chinese IPOs have been a problem as well. Connected device maker Viomi is down 6 percent since going public in September.
Roku: down 18 percent
Okta: down 14 percent
Spotify: down 14 percent
Eventbrite: down 20 percent
Market volatility is hurting the confidence of IPO investors. "IPOs need a good market to get deals done, and we're not seeing that," Renaissance Capital's Kathleen Smith told CNBC
"Any time you see volatility in the markets, all bets are off," said Cindi Profaca, who has tracked IPOs for more than 20 years at IPOFinancial.com. "We typically see terms reduced, and deals postponed, so this action is not a surprise."
Smith noted that of nine IPOs scheduled to go public this week, two have been postponed, two priced below the range and two dropped their prices.
It's not just the United States. Recent volatility in China caused Tencent Music to delay its U.S. IPO, which would have valued the company somewhere at $25 billion to $30 billion.
This has potential implications for those big tech unicorns that might want to go public next year. Venture capital firms have locked up huge amounts of money in these unicorns, many for more than a decade. They are looking to get out.
The issue is what will happen if this volatility continues. Profaca said the tech unicorns will have three choices: "They will have to take a lower price, or float a smaller number of shares, or postpone the offer indefinitely." What they choose to do depends on the demands of their private equity investors and the needs of the companies.