Credit: Shutterstock photoTech IPOs see a hard road in 2016:Higher volatility, lower returns, contracting multiples
2015 saw the lowest tech IPO activity since 2009, and 2016 is not looking much better. The VIX Volatility Index rose again this week - it has remained above 20 almost every day this year. Consumer-focused tech and internet names like Twitter ( TWTR ; -32% year-to-date), GoPro (GPRO; -45%) and Fitbit (FIT; -47%) have had well-documented declines. On Friday, weak earnings and lower guidance caused Tableau Software ( DATA ) to sink 50% while LinkedIn fell 44% and New Relic ( NEWR ) declined 22%. 4Q15 IPO Match Group ( MTCH ) missed its first earnings report as a public company and fell 26% this week. For other high-growth, high-loss tech names, investors ditched their shares before the upcoming earnings announcement, including Hortonworks (HDP; -20% on Friday; -63% YTD), Rapid7 (RPD-14%; -27%) and to a lesser extent Shopify (SHOP; -7%, -15%). Even Atlassian ( TEAM ), which blew out earnings and raised guidance, fell 16% on Friday, and now trades below its offer price. High-profile 4Q15 'unicorns' Pure Storage (PSTG; -28% from IPO) and Square (SQ; -4%) are yet more casualties of the sell-off. The tech IPOs in the 4Q15 faced intense valuation pushback, but now only three of the nine trade above their offer price, and only one is up more than 4% ( Adesto Technologies ( IOTS ), which had to slash its valuation). The massive backlog of pre-IPO tech companies and their VCs can only watch in horror and conclude: These are tough times for tech.
Upcoming tech IPOs
With the exception of quasi-tech company Tabula Rasa Healthcare (TRHC), the tech sector has not seen a single new filing this year. Notable tech filings from December - Nutanix (NTNX), Acacia Communications (ACIA) and SecureWorks (SCWX) - have waited on the sidelines for good reason. Showing another possible route, Private Company Watchlist member Jasper announced that it would be acquired by Cisco for $1.4 billion - roughly the same valuation it achieved in April 2014.
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The article Tech sector sell-off sends 2015 IPOs below issue, challenges 2016 tech originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.
Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital, the Renaissance IPO ETF (symbol: IPO) or the Global IPO Fund (symbol: IPOSX) , may have investments in securities of companies mentioned.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
