Finance

Tariffs spell trouble for VCs amid Klarna, StubHub IPO delays

Published

2 months ago

April 11, 2025

A VIX volatility index chart on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, March 19, 2025. Federal Reserve officials held their benchmark interest rate steady for a second straight meeting, though they telegraphed expectations for slower economic growth and higher inflation.

Photographer: Michael Nagle | Bloomberg | Getty Images

Already under pressure amid last week’s multitrillion-dollar stock market rout, the venture capital industry now faces an even tougher outlook amid ongoing uncertainty stemming from U.S. tariffs.

A dearth of initial public offerings or mergers and acquisitions — coupled with the trend that startups are now staying private for longer — has put immense strain on VC funds. Venture capitalists can typically only realize gains on their investments when a company goes public or is sold, allowing them to cash out.

Mere days after U.S. President Donald Trump announced plans to impose so-called reciprocal tariffs on a swathe of countries, it emerged that two major tech unicorns — fintech firm Klarna and ticketing platform StubHub — were delaying plans to go public due to a sharp plunge in global equity markets. Notably, both companies had filed initial public offering prospectuses in recent weeks.

“No one can go out with this turbulence,” Tobias Bengtsdahl, a partner at VC firm Antler’s Nordics fund, told CNBC on a call last week. “When the market plunges like it has now … you have to do the same prediction on the private markets.”

Tough outlook for VC

As private markets don’t move in the same way public markets do, it becomes more difficult for tech startups to go out and raise capital — whether from the stock market or venture capital — as they could end up seeing their valuations go down.

Private equity slower to react to tariffs than public markets, fund manager says

“We don’t change the valuations of our startups just because the stock market goes down,” Antler’s Bengtsdahl said. Venture-backed startups’ valuations only tend to change when they’re raising a new equity round.

“That has a huge impact on funds raising right now and startups raising from multi-stage investors,” he added.

That could soon make it more difficult for startups — and especially growth-stage firms — to raise venture capital. Later-stage firms tend to be more exposed to swings in public markets than early-stage startups, given they’re closer than most to reaching the IPO milestone.

Private markets are less liquid than public markets, meaning investors can’t sell shares easily. The main way private equity owners sell part or all of their stake in a company is via an IPO or M&A — also known as an “exit.” The other alternative is to sell shares to another investor on the secondary market.

“[General partners] will be under pressure from [limited partners] to make sure these exits happen,” Alex Barr, partner and head of private market fund management firm Sarasin Bread Street, told CNBC last week, adding that IPOs remain a “very fickle beast to manage.”

General partners are investors who manage a venture fund, whereas limited partners are institutional investors — like pension funds and hedge funds — or high-net-worth individuals who pour money into funds.

Limited partners invest in a venture fund in the hope that they’ll generate sizable returns over its lifetime, which can span as long as 10 years. Early-stage funds invest in the hope that a few startups in their portfolio will generate the kind of returns outcomes like Uber and Spotify reaped for their private backers.

Hope for Europe tech?

On the bright side, the uncertainty could be a chance for Europe’s private tech startups to shine, according to Sanjot Malhi, a partner at London-based venture capital firm Northzone.

“The short-term pause in IPO activity is a natural response to recent market turbulence, and we can expect to have more clarity on company positions once some sense of stability is restored,” Malhi told CNBC.

He nevertheless added that, “if talent and liquidity find the U.S. environment less hospitable, that flow has to go somewhere, and Europe has a chance to benefit.”

Christel Piron, CEO of startup investor PSV Foundry, told CNBC that the “silver lining” from uncertainty created by tariffs is how “Europe is moving closer together amid the turbulence.”

“We’re seeing more founders choosing to stay and scale here, driven by a growing sense of responsibility to help build a resilient European tech nation,” Piron said.

M&A and IPO activity have paused due to market uncertainty, says Barclays' Kristin Roth DeClark

There could also be other routes to exit for venture capital funds, according to Northzone’s Malhi — including acquisitions or even so-called “down rounds” where startups raise funds at reduced valuations.

“If the global IPO window does narrow in the longer term, then we would still expect a strong M&A landscape, as stakeholders seek ‘problem-solving’ exits,” he told CNBC.

“If that is the case, we may also see an increase in later-stage fundraises, as companies look to bridge the capital gap until they can find such opportunities, albeit at potentially lower valuations.”

Further down the line, investors are holding out hope for big tech IPOs to return later into Trump’s presidency. VCs had counted on the Trump administration resulting in a reinvigorated IPO market.

“A lot of people feel Trump has promised them open up the IPO market and open up the M&A market,” Antler’s Bengtsdahl said.

“It’s now 6 months into his term,” he added, noting the market can tolerate the new administration’s failure to meet this pledge in its early days. “But people are demanding that it happens within his term.”

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

1 day ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”