Tech IPO Market Is Starting To Heat Up
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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