Tech IPO Mar­ket Is Star­ting To Heat Up

L'Opinion - - The Wall Street Journal & Lopinion -

A recent burst of suc­cess­ful tech­no­lo­gy IPOs has led some ri­chly va­lued com­pa­nies that were content to dwell in the pri­vate mar­kets to take steps to­ward going pu­blic.

The so­lid de­buts of firms such as Spo­ti­fy Tech­no­lo­gy SA, Drop­box Inc. and Zs­ca­ler Inc. have hel­ped ca­ta­lyze a shift among pri­vate- com­pa­ny CEOs and se­nior exe­cu­tives to­ward vie­wing pu­blic mar­kets as a hos­pi­table place to raise ca­pi­tal, said ban­kers, lawyers and in­ves­tors in in­ter­views. That comes af­ter years of re­la­ti­ve­ly weak is­suance, par­ti­cu­lar­ly among tech com­pa­nies.

For ins­tance, tech com­pa­nies Event­brite and Up­work have ta­ken steps to­ward ini­tial pu­blic of­fe­rings, ac­cor­ding to people fa­mi­liar with their plans. Both of the Ca­li­for­nia com­pa­nies are ex­pec­ted to de­but on the pu­blic mar­kets in the se­cond half of this year, these people said.

“Our pi­pe­line is lar­ger than I’ve seen it in at least a few years,” said Richard Trues­dell, a part­ner at law firm Da­vis Polk & Ward­well LLP. Com­pa­nies from a wide range of in­dus­tries are see­king to list this year, he said, calling it a “good si­gn for the ro­bust­ness of the IPO mar­ket.”

In a si­gn of in­ves­tors’ ea­ger­ness for IPOs, Zuo­ra Inc., a soft­ware com­pa­ny that ma­nages sub­scrip­tion ser­vices for cor­po­rate clients, pri­ced its IPO at $14 a share Wed­nes­day, above its al­rea­dy boos­ted ex­pec­ted pri­cing range, and then tra­ded up 43% on Thurs­day to close at $20. Zuo­ra’s foun­der and chief exe­cu­tive, Tien Tzuo, said in an interview that in ad­di­tion to rai­sing ca­pi­tal – the firm ge­ne­ra­ted $154 mil­lion in the of­fe­ring – the pu­blic mar­kets of­fer a si­gn to clients that the com­pa­ny will be around for the long term, par­ti­cu­lar­ly for its large cor­po­rate cus­to­mers. “Our cus­to­mers are the big­gest com­pa­nies in the world, and they’re pu­blic com­pa­nies,” he said.

In recent weeks, ban­kers say there has been a stea­dy drum­beat of “bake-offs,” in which com­pa­nies interview po­ten­tial un­der­wri­ters to help them pre­pare for an IPO. Be­cause of this ac­ti­vi­ty, ban­kers and other mar­ket par­ti­ci­pants now ex­pect a bu­sy se­cond half of 2018 for IPOs.

This year through Wed­nes­day’s close, 51 com­pa­nies have gone pu­blic on U.S. ex­changes, rai­sing $17.2 bil­lion, ac­cor­ding to da­ta pro­vi­der Dea­lo­gic. One of those com­pa­nies – Spo­ti­fy, which was one of the lar­gest to de­but this year by mar­ket va­lue – did so wi­thout rai­sing any ca­pi­tal. Still, this year’s is­suance is up slight­ly from this time last year when 37 com­pa­nies had rai­sed $16.2 bil­lion. It is well above 2016’s weak is­suance mar­ket, when just 10 com­pa­nies had rai­sed $1.25 bil­lion at this point in the year, Dea­lo­gic da­ta show; 2016 wound up being the slo­west year for new of­fe­rings in more than a de­cade, mea­su­red by the amount of mo­ney rai­sed.

Some ban­kers and lawyers say recent stock-mar­ket vo­la­ti­li­ty

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