Tech unicorns are going public at near-record pace
In 2018, 37 firms valued at $1B or more at the time of their IPO listed shares in the U.S.
The reign of the unicorn IPO has commenced.
Investors gripe that highly valued tech startups are eschewing the public markets and opting to remain private for longer. But in 2018, to little fanfare, 37 companies valued at $1 billion (U.S.) or more at the time of their IPO listed shares in the U.S., the most to do so since the height of the dot-com boom in 2000, according to Dealogic.
That is expected to rise next year, according to bankers and fund managers who follow the IPO market. In 2019 some of the hottest names among the tech unicorns, including Uber Technologies Inc., Lyft Inc. and Slack Technologies Inc. are considering IPOs.
Also widely expected: many lesser-known software companies that tout private valuations between $1 billion and $5 billion. These companies have made up the bulk of the 2018 unicorns, and for that reason haven’t gotten as much attention as higher-profile firms, ac- cording to some analysts.
“These are stories people don’t know well because they’re not an app on your phone,” said David Ethridge, U.S. IPO services leader at PwC. “But there’s a very steady pace, and there’s been a strong IPO market that’s supported this.”
“The question is, ‘What about 2019?’ and that will take some guts and courage, but I think a lot of companies will make the decision to go public even with the difficult market,” he added.
There is more good news: If 2018 is any indication, next year’s class of tech unicorns should perform well even if the broader market is rocky. Shares of newly public tech companies that were valued at $1 billion or more at the time of their IPO are soaring, even in a down market. So far this year, tech companies valued at a minimum of $1 billion at the time of their IPO are up 16% from their IPO prices through Friday. Overall, tech companies that went public in 2018 are up 9% on average, while the S&P 500 is down 4.8% year to date.
One of the big unicorn winners this year has been electronic-signature technology company DocuSign Inc. The company went public in April at $29 a share. Its shares closed Monday at $41.75.
Of course, there is no guarantee of strong performance, and some big tech names have struggled. Last week, Tencent Music Entertainment Group priced its IPO at the low end of its expected range. While shares of the music-streaming company, which notched a valuation of more than $20 billion in its IPO, rose on its first day of trading, they have since fallen below their IPO price of $13 apiece.