US tech IPOs virtually disappeared in the 4Q19 following disappointments from multiple fast-growing, unprofitable unicorns. Healthcare (55% of 4Q IPOs) and Chinese issuers (24%) have monopolized IPO deal flow since October, but tech is returning to market alongside a comeback in the IPO Index. Back-office automation unicorn Bill.com (BILL) and social media management software Sprout Social (SPT) are expected to IPO next week, joined by Chinese software platform OneConnect Financial Technology (OCFT).
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Two small US tech companies have IPO’d in the 4Q, but Bill.com is the first tech IPO of the quarter with a billion-dollar-plus valuation following strong activity from big tech in the 2Q and 3Q. Sprout Social isn’t far behind with a nearly $900 million proposed valuation.
So far in the 4Q19, 76% of IPOs have priced below the midpoint, compared to 30% in the first nine months of 2019. IPOs in the 4Q19 have had lower first day returns than those in the first three quarters of the year, averaging 4% compared to 21%. However, initially cautious investors have been more optimistic in the aftermarket: 4Q IPOs have averaged a return of 8% after the first day, up from -4% in the first three quarters of the year.
The article US tech looks to test a challenging IPO market originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.
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