IPO Appetite Strong In Spite Of Uber And Lyft

Initial Public Offering

Despite the disappointing performance of both Uber and Lyft, the initial public offering (IPO) market remains strong.

Three companies went public last week: cybersecurity firm CrowdStrike Holdings Inc., online pet-supply retailer Chewy Inc. and freelance-services marketplace Fiverr International. Investors sent all of their shares soaring 50 percent or more.

In addition, Slack Technologies is expected to hit a valuation of more than $18 billion when it goes public this week, which is more than double its private valuation last year. It's a sign that investors are not shying away from newly public companies.

In fact, the IPO market is expected to set a record by dollars raised in 2019. And this year's tech IPOs are up around 30 percent on average through Friday’s (June 14) close, with ten out of the year’s 26 tech IPOs up more than 50 percent from their IPO prices.

“The last few weeks have provided proof points that there is no overhang from the deals that have struggled,” said Justin Smolkin, head of technology, media and telecommunications equity capital markets at Deutsche Bank AG, according The Wall Street Journal. “Investors are very receptive to the IPO market and are being rewarded for their participation.”

Despite the success, however, there has still been a historic decline in the number of U.S. public companies, as larger companies snap up fast-growing tech firms. Salesforce.com Inc. recently agreed to buy data-analytics platform Tableau Software Inc. for more than $15 billion, while Alphabet is acquiring Looker for $2.6 billion.

As a result, tech companies have sold just 16 percent of themselves on average in 2019, compared with 26 percent on average since 1995. Slack, for example, isn’t selling any new shares in its direct listing.

“We came into 2019 thinking we’d have an IPO renaissance, and we’ve been encouraged by constructive equity markets and strong public-investor appetite for these high-growth companies,” said Bill Ford, chief executive of private-equity firm General Atlantic.



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