Top 10 Tech IPOs Of 2015
Tech IPOs took a hit in 2015, with half the number of new public companies as last year. But it wasn't all bad news. Here's a look at the 10 tech IPOs that raised the most money in 2015.
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Despite the popularity of software security stocks amid the high-profile breaches that have hit organizations from government agencies to retailers (such as Target), Rapid7 is facing a difficult time keeping its share price above the level it set its IPO in July. Rapid7 was initially feeling the investor love, pricing its IPO at $16 a share under high demand, a move that put it above its initial pricing range of $13 to $15 a share.
Baozun, a Chinese e-commerce company that had industry titan Alibaba as its largest stakeholder before it went public, has faced challenges appealing to investors. The company ended up pricing the American depositary shares in its May IPO far below its $12 to $14 pricing range when it set its IPO price at $10 a share, according to the Wall Street Journal. Since its IPO, Baozun's shares have fallen as low as $4 a share as investors have become more skittish about the economy in China and because regulatory challenges to Alibaba over counterfeit goods sold on its e-commerce platform may spill over to Baozun and other e-commerce players in China.
Shopify, which provides software tools to retailers that help them set up online storefronts, take orders, and process payments, pulled off a strong IPO performance in May and has continued it on through the end of the year. The company raised its pricing range to $14 to $16 a share from its original range of $12 to $14 a share. In the end, sharp investor demand allowed Shopify to ultimately price its IPO at an even higher level of $17 a share, noted Fortune.
Cloud storage company Box managed to garner enough investor support to price its IPO at $14 a share in January, a move that put it above its pricing range of $11 to $13 a share, according to MarketWatch. But that love affair with investors subsided when Box's share price slid during the summer, which is when Box's lockup expired, noted a report in Investor's Business Daily. When a lockup expires, employees and other insiders who held pre-IPO shares are allowed to sell their stock on the open market.
Square, which developed and markets a mobile payment device that attaches to a tablet computer or smartphone to receive credit card and debit payments, took a hit for the team in launching its IPO at roughly half its valuation, said Renaissance Capital's Kathleen Smith. Companies that have a private valuation of $1 billion or more are called "unicorns," and Square was among this elite group of around 150 tech companies, Smith said. By pricing its IPO at $9 a share in mid-November, substantially below its initial IPO pricing range of $11 to $13 a share, Square left some room for investors to make a profit and was able to show a strong performance on its first day of trading, with its stock closing at $13.07 a share.
Online arts and crafts marketplace Etsy has become a poster child of tech IPOs gone wrong. The company priced its IPO at $16 a share in April, marking investor enthusiasm for the stock by pricing it at the top of the $14 to $16 a share range. The stock soared on its first trading day, closing at $30 a share. But the stock has been battered by its earnings report and also following Amazon.com's announcement it planned to unveil its own version of crafts goods e-commerce with its new service called Amazon Handmade, according to Fortune magazine.
Match Group, which operates such dating sites as Tinder, OkCupid, and Match.com, priced its IPO at $12 per share in November, setting it at the low end of its pricing range of $12 to $14 a share. The company opened higher than its IPO price, and rose 9% on its first trading day to close at $14.75.
Pure Storage, a flash storage company, has struggled to keep its stock price above its IPO price since it debuted in October. The company priced its IPO at $17 a share, but fell 5.8% on its first trading day, according to a MarketWatch report. The stock has languished below its IPO price until earlier this month when, according to Motley Fool, it posted stronger than expected third-quarter revenue and earnings.
GoDaddy, the website hosting service known for its provocative advertisements, priced its IPO above its expected range, signaling strong investor interest. GoDaddy priced its IPO at $20 a share, above its range of $17 to $19 a share, according to a CNN Money report. The company gained 30% on its first trading day in April before settling back where it began the day at $26.15 a share. Over the past nine months, it has gained nearly 25%. At the time of GoDaddy's IPO, the company was considered reasonably valued and had good cash flow and growth prospects, according to the report.
Collaboration and project management software developer Atlassian launched its IPO in December with a bang. The company initially thought it would price its IPO in a range of $16.50 to $18.50 a share, but investor demand was high, and it raised its range to $19 to $20 a share. Even then investors were still in a frenzy to get a piece of the action, so Atlassian ultimately priced its IPO at $21 a share, raising $462 million.
"I think this Atlassian deal is important," said Renaissance Capital's Kathleen Smith. "I see some signs of a little thawing (of potential tech IPOs) because of this deal." Atlassian soared 31% on its first day of trading.
As the year comes to a close, the total number of IPOs across all industries fell to a mere 169, down approximately 39% from the previous year and roughly a third of the 486 IPOs during the market's go-go days of 1999, according to Renaissance Capital, manager of IPO-focused Exchange Traded Funds (ETFs). But tech IPOs, in particular, took it on the chin in 2015.
Only 23 tech IPOs launched this year, less than half of the 55 tech IPOs from last year, and a blip from the 345 tech IPOs in 1999. The number of tech IPOs was also fewer than the 31 launched during the financial crisis of 2008 and 2009, according to Kathleen Smith, principal of Renaissance Capital.
What gives with tech IPOs? They were once the golden child during the Internet bubble.
"Tech has really been a sleeper," Smith said.
Fewer tech IPOs are getting out the door, because a number of these privately held tech companies are being valued at lower levels than their previous venture round, otherwise known as a "down round," Smith said. As a result, the technology companies in a down round are apt to put off going public until the markets vastly improve or investors' appetite for their particular type of technology dramatically improves.
[Read 8 Cloud Computing Predictions For 2016.]
For those tech IPOs that managed to hit the public markets this year, their overall post-launch performance has been lackluster to downright dismal, Smith noted. Through most of the year, these newly minted public tech companies were trading flat to their closing price on the first day of trading, compared with an average 18% gain on their first trading day.
"Tech has the biggest first-day pop compared with other sectors, but there's no follow through," Smith said. At least the current performance for tech IPOs has improved since the summer, when these technology IPO companies were overall down 4%.
In the fourth quarter, Renaissance Capital's IPO index has seen some improvement, as companies became more realistic in their first-day valuations, providing their stock not only a pop on the first day of trading but better performance in the days and weeks that followed.
Square, for example, priced its IPO at the midpoint of its pricing range and at a valuation that was 50% below its last venture capital round, Smith said. But Square was determined to go public and bit the bullet in accepting a valuation for its IPO at levels far less than what investors who participated in its last private funding round thought the company was worth.
During the first half of 2015, the Renaissance Capital index was outperforming the S&P 500 index, but it has since slipped. Once the index is again outperforming the S&P 500, that's a sign that tech IPOs are gaining favor on Wall Street, Smith said.
To learn more about how tech IPOs fared this year, take a look at this countdown of the top 10 tech IPOs that raised the most money in 2015. Then let us know what you think in the comments.
**Elite 100 2016: DEADLINE EXTENDED TO JAN. 15, 2016** There's still time to be a part of the prestigious InformationWeek Elite 100! Submit your company's application by Jan. 15, 2016. You'll find instructions and a submission form here: InformationWeek's Elite 100 2016.
As the year comes to a close, the total number of IPOs across all industries fell to a mere 169, down approximately 39% from the previous year and roughly a third of the 486 IPOs during the market's go-go days of 1999, according to Renaissance Capital, manager of IPO-focused Exchange Traded Funds (ETFs). But tech IPOs, in particular, took it on the chin in 2015.
Only 23 tech IPOs launched this year, less than half of the 55 tech IPOs from last year, and a blip from the 345 tech IPOs in 1999. The number of tech IPOs was also fewer than the 31 launched during the financial crisis of 2008 and 2009, according to Kathleen Smith, principal of Renaissance Capital.
What gives with tech IPOs? They were once the golden child during the Internet bubble.
"Tech has really been a sleeper," Smith said.
Fewer tech IPOs are getting out the door, because a number of these privately held tech companies are being valued at lower levels than their previous venture round, otherwise known as a "down round," Smith said. As a result, the technology companies in a down round are apt to put off going public until the markets vastly improve or investors' appetite for their particular type of technology dramatically improves.
[Read 8 Cloud Computing Predictions For 2016.]
For those tech IPOs that managed to hit the public markets this year, their overall post-launch performance has been lackluster to downright dismal, Smith noted. Through most of the year, these newly minted public tech companies were trading flat to their closing price on the first day of trading, compared with an average 18% gain on their first trading day.
"Tech has the biggest first-day pop compared with other sectors, but there's no follow through," Smith said. At least the current performance for tech IPOs has improved since the summer, when these technology IPO companies were overall down 4%.
In the fourth quarter, Renaissance Capital's IPO index has seen some improvement, as companies became more realistic in their first-day valuations, providing their stock not only a pop on the first day of trading but better performance in the days and weeks that followed.
Square, for example, priced its IPO at the midpoint of its pricing range and at a valuation that was 50% below its last venture capital round, Smith said. But Square was determined to go public and bit the bullet in accepting a valuation for its IPO at levels far less than what investors who participated in its last private funding round thought the company was worth.
During the first half of 2015, the Renaissance Capital index was outperforming the S&P 500 index, but it has since slipped. Once the index is again outperforming the S&P 500, that's a sign that tech IPOs are gaining favor on Wall Street, Smith said.
To learn more about how tech IPOs fared this year, take a look at this countdown of the top 10 tech IPOs that raised the most money in 2015. Then let us know what you think in the comments.
**Elite 100 2016: DEADLINE EXTENDED TO JAN. 15, 2016** There's still time to be a part of the prestigious InformationWeek Elite 100! Submit your company's application by Jan. 15, 2016. You'll find instructions and a submission form here: InformationWeek's Elite 100 2016.
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