Investments

Newly Public Tech Companies Rush To Sell More Shares

newly-public-tech-stocks-follow-on-IPO

Tech companies that have recently gone public are wading back into the market to sell more shares at a rate that the Wall Street Journal reported is at a “nearly unprecedented clip.”

According to the Wall Street Journal, around 44 percent of the follow-on stock offerings from U.S. tech companies during the first ten months of 2018 have come within 180 days of going public. The Wall Street Journal noted it is the second highest year percentage since the data began being collected by Dealogic back in 1995. It comes as investors are clamoring to invest in tech companies, with tech stocks that debuted on the U.S. exchanges up 22 percent through the end of October. The S&P 500 is up about 1.4 percent. Tech stocks in the index are up 9.9 percent, noted the report.  Meanwhile, the Nasdaq fell around 10 percent in October, with October being the worst perform month for the Nasdaq in a decade. Proceeds from the share sales of tech companies that are already public is now at its highest level since 2000, noted the Wall Street Journal. It said the rate at which new public companies are returning to the market illustrates how hungry investors are for new tech offerings outside of investing in an initial public offering.

“Even though there’s been a shift among investors toward more defensive parts of the economy, people still believe in the tech sector, particularly in software, that growth will be strong,” said Colin Stewart, managing director and vice chairman in global capital markets at Morgan Stanley, in the report.  The Wall Street Journal reported that 2019 may be even bigger for tech IPOs as some of the country’s biggest startups such as Uber and Palantir Technologies are expected to launch IPOs. “Tech IPOs are still a scarce asset class,” said Chris Cormier, head of technology equity capital markets for the Americas at UBS Group, in the same report. “Investors are looking for the next-gen name to own for the next three-to-five years.”

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