writes copy 27 Dec 2018

2019 could be a blockbuster year for tech IPOs as Uber Lyft Slack Airbnb others prep to go public

Sponsored Content
Smartsheet CEO Mark Mader on the NYSE floor after the Seattle-area company went public earlier this year. (Smartsheet Photo)

There were several high-profile U.S. tech IPOs in 2018, from Spotify to Sonos to Smartsheet. But with an increasing number of billion-dollar tech giants readying to test the public markets, it’s 2019 that analysts say could be a “blockbuster” year for IPOs.

Driven in part by 52 tech companies that went public, overall U.S. IPO activity hit a 4-year high in 2014, according to an annual IPO report from Renaissance Capital.

Four Washington-based companies went public, including e-signature powerhouse tax automation company  DocuSign  in April, work collaboration software maker Smartsheet in April, and tax automation startup  Avalara  in June '” all part of a trend this year of Wall Street warming to enterprise software organizations. Vancouver, Wash.-based laser-maker nLight went public in April.

DocuSign and Smartsheet saw shares increase initially but have returned to IPO price levels in the past few months, part of the stock market downswing in the fourth quarter. Shares of Avalara and nLight are down about a third since their respective IPO dates.

Other U.S. tech companies that went public in 2018 include Dropbox (down 29 percent); zScaler (up 6 percent); Spotify (down 20 percent); SurveyMonkey (down 30 percent); Eventbrite (down 23 percent); Sonos (down 55 percent); and Domo (down 26 percent).

The annual Tech IPO Pipeline report from CBInsights noted 19 U.S-based venture capital-backed tech companies going public in 2018, the same number as 2017.

On the sidelines

(CBInsights Chart)

Over the past few years, many tech companies have held off on going public, opting instead to raise money from private firms that have plenty of cash to work with. CBInsights reported that the median time between first financing and public offering was 10.1 years for companies that had an IPO this year, up from 6.9 years in 2013. There were also nearly six times more $100 million-plus private financings than U.S. venture-backed tech IPOs in 2018.

Faced with the decision to go public or be bought out by a larger tech giant, Qualtrics and Adaptive Insights '” two companies worth $1 billion or more, also known as “unicorns” '” were acquired just days before their scheduled IPOs. AppNexus and Glassdoor were also reported to go public but got swooped up by AT&T and Recruit Holdings, respectively.

But 2019 may be different. There are several “unicorns” waiting on the IPO sidelines rumored to go public next year, including Uber, Lyft, Slack, Palantir, Pinterest, Airbnb, Zoom, Postmates, CrowdStrike, Cloudflare, and many others.

The Wall Street Journal reported that there is still plenty of private money available, “but these companies are now rethinking their aversions to the public markets, drawn by sky-high stock prices and the opportunity to establish a liquid market for their shares.”

Analysts from investment data research firm PitchBook predicted that IPO proceeds in 2019 will account for a decade-high proportion of total VC exit value.  The 2019 listings could also mint a lot of new millionaires in Silicon Valley and affect the local real estate market, Recode reported.

CBInsights included nine Washington-based companies in its IPO Pipeline Report that could go public next year:  Amperity, Auth0, Chef Software, Convoy, OfferUp, Outreach, Qumulo, Rover and Skytap.

Economic uncertainty

(GeekWire Photo / Taylor Soper)

While this quarter’s stock market downturn drove negative returns for IPOs, the economic uncertainty has caused some companies such as Uber and Lyft to speed up their IPO plans, The New York Times reported earlier this month.

“The calculus for when a company publicly lists its shares is often a moving target, but Uber's and Lyft's actions will carry particular weight with a swath of other highly valued Silicon Valley start-ups that are also preparing to approach the public markets,” the Times reported.

In its report, Renaissance Capital said “we enter 2019 on uncertain footing” due to the global selloff during Q4.

“On the one hand, this type of market shock normally puts a significant dent in IPO activity,” the report noted. “On the other hand, after years of IPO rumors, Uber, Lyft and a large backlog of other unicorns are firmly indicating plans to complete some of the largest-ever IPOs. As long as the broader markets do not sink further, 2019 could still be a big year for proceeds if not for deal count.”

PitchBook said that even with uncertainty on Wall Street, demand for shares in companies such as Uber, Lyft, and Airbnb “will facilitate healthy IPOs almost regardless of market conditions.”

CBInsights said 2019 is  “shaping up to be a blockbuster year for tech IPOs.”

“Consider that if Uber, Airbnb, Pinterest, and Slack were to go public at their rumored IPO valuations, they would all rank among the 10 largest venture-backed tech IPOs since 2012,” its report noted.

Looking further ahead, Crunchbase cautioned that if the big IPOs disappoint in 2019, private capital interest in venture capital could lessen.

“That, eventually, could finally slow down tech startups,” Crunchbase wrote.

Read the Original Article