Why the world’s biggest tech companies may never IPO again - Peter Singlehurst [Baillie Gifford]

Private markets can keep tech giants private forever

Baillie Gifford's private companies team exists because growth equity moved private. Public markets no longer have a monopoly on liquidity, so the largest technology companies can raise capital and let shareholders sell without an IPO. That lets Baillie Gifford own the same kind of businesses it always backed, only in private form, and explains why private growth companies like ByteDance and SpaceX anchor the portfolio.

Takeaways

• Public markets lost their liquidity monopoly. Peter Singlehurst argues the biggest technology companies may never need to IPO because private markets now offer liquidity. Baillie Gifford's Schiehallion and Scottish Mortgage funds let clients hold these companies.
• Baillie Gifford backs same stage, privately. It invested in Tesla in 2013 at a $3bn market cap and SpaceX at a $30bn valuation. The companies are the same stage, only private, so only private clients captured SpaceX's upside.
• ByteDance looks cheap at $600bn. Singlehurst calls the roughly $600bn private valuation way too cheap. Baillie Gifford bought shares at about four times free cash flow in a fast-growing business he says is 50 times larger than Meta at its IPO.
• China pessimism creates contrarian opportunity. Singlehurst attacks the recurring 'China can't do x' narrative and points to 1.4bn people and cheap robotics companies. Peers closing China offices make him want to invest more. Alibaba was Baillie Gifford's first private investment.
• Debt kills businesses that could survive. Baillie Gifford has seen companies killed by debt that could have thrived without it. Singlehurst argues leverage belongs only where cash flows are regular and predictable, citing Bending Spoons, and that unprofitable companies should fund themselves with equity.
• Great businesses usually have good IPOs. Singlehurst says companies should optimise for the quality of their investors rather than price. Klarna and Figma fell after listing, while Amazon's stable shareholder base came from Bezos optimising for long-term free cash flow per share.

How Baillie Gifford supports private companies

• It helps private companies get ready to be public, moving from an investor-led board to an independent-led board.
• It helps establish dual class share structures and network within the thousand public businesses it owns.
• Its research library holds about 75,000 to 80,000 proprietary reports written over 30 to 40 years.
• Past work on the defence sector informs Anduril. Software roll-up research informs Bending Spoons, and early Meta work informs ByteDance.