NEWS ANALYSIS: A good response from investors June 23 could help determine whether companies such as Dropbox, Uber and others decide to test the waters this year.
Information technology IPOs have been AWOL halfway through 2016. This has had analysts, investors and market watchers scratching their heads and wondering what the heck is going on.
There certainly are plenty of quality companies—Uber, Airbnb and Dropbox, for merely three examples—rising up that could consider an initial public offering, no question about that. And there still is a ton of money being invested in new and relatively new companies every week. We at eWEEK
who report on such venture capital movements know all about this.
So why are IPOs not happening? There are two reasons: First, the markets currently are generally perceived to be too volatile (or hostile, as some people would put it)—especially as hair-trigger automatic trading on projections have become the norm. Second, larger companies are swallowing up smaller ones at such a breakneck pace that they don't have time to consider going public.
Last year, $20 billion worth of tech companies went private, according to Bulger Partners, a mergers and acquisitions advisory firm. On the other side, tech IPOs raised a mere $21 billion. Bulger Partners reported a whopping $232 billion worth of M&A transaction value for 2015 alone.
IPOs a Risky Proposition
IPOs have to be successful on Day 1, that's a fact. If they are not, the walls often can come crashing in very quickly, and fledgling startups need to have nerves of vanadium to weather such a potential crisis.
But let's put all of that aside for now, because there has been a development. Twilio Inc., a small but highly regarded startup whose cloud service enables developers to build and operate real-time communications within software applications, is making a breakthrough of sorts: It is going public June 23 at $15 per share.
Twilio allows software developers to programmatically make and receive phone calls and send and receive text messages using its Web-service APIs. Twilio's services, which go a long way toward keeping bugs out of software—and are especially valuable in rapid iteration-type environments—are accessed over HTTP and billed based on usage.
As of last year, more than 560,000 software developers were using Twilio in their daily production work.
The San Francisco-based company raised more than it expected—about $150 million, or about $11 per share—in its initial private offering June 22. That's a good sign for the dozens of other so-called unicorns that have been valued at more than $1 billion through private fundraising.
Twilio Will Start Trading on Nasdaq at $15
Twilio said June 22 that it will start trading June 23 on the NYSE at $15 a share, above the $12-to-$14 range the company had previously indicated. The June 22 investors at $11 no doubt are pleased with that declaration.
The deal, which will be the first Silicon Valley tech IPO of the year, is a closely watched test case to determine whether the market will be receptive of future tech IPOs this year. A good response June 23 could help determine whether companies such as Dropbox, Uber and others decide to test the IPO waters themselves later this year.
The offering of the San Francisco-based company comes as U.S.-listed IPOs are on track for their worst year in terms of numbers since the financial crisis year in 2008.