We are excited to announce that Mattermark has re-launched as an independent company! Learn More →
Back to All Articles  |  Editorial

The US Tech IPO Market Is Four For Four So Far In 2016

Editor’s Morning Note: Line’s strong debut this morning puts the fourth straight US-market IPO success on the board. 

giphy (38)

How the author imagines the world looks through the lens of HFT.

Line’s IPO started public trading at around $42 this morning, up from its roughly $33 initial price. The strong first day of trading isn’t a surprise given early demand, but it does indicate that upper-end pricing isn’t enough to extinguish current investor appetite for IPO equity.

The company’s success in its debut lowers concern about its user growth. Akin to Twitter, Line has a history of sturdy financial performance, including strong revenue growth. However, those positive indicators are coupled to slow active user accretion.

User growth, of course, is critical for social companies. That basic level of attention is the space into which social companies can sell stickers and other digital goods and services.

Critical Mass?

Notably, each technology IPO on US markets this year is up from its offer price. Acacia Communications, Twilio, SecureWorks, and now Line have all moved north from their final pricing. SecureWorks is the least up from its debut cost, but four ups in a row points to real investor demand.

That point is underscored by the differences between the companies: Acacia is a hardware company, Twilio does cloud telephony, Line is a Japanese social application going public in two countries, and SecureWorks is a money-losing Dell spinoff. Each IPO found a home.

The subtext here is that the market is more than willing to accept new offerings at fair prices. What counts as fair, of course, will be up to user interpretation.

Which is the rub, really. You might think that having Twilio, a venture capital-backed unicorn nearly triple from its IPO price would be a catalyst for other players to dive in. So far, not really.

The addition of the Line IPO, with its upper-end price and large aggregate sale of equity, writes another paragraph in the argument against staying private. And if Line’s IPO doesn’t provide confidence and spur filing activity, I don’t know what can in the short term.

So Much For The Afterglow

Twitter shares are up a modest 1.47 percent today to $17.99. The social media company still trades for a stiff discount to its original $26 IPO price. Twitter set a 52 week low at $13.73, a figure that it is comfortably above.

However, given the overlap between Twitter and Line, it wasn’t out of the question to expect that a strong debut for the latter would bolster the former. That hasn’t turned out to the be the case. Twitter is up today, and above broader market performance for the day, but is still comfortably inside of its three-day trading range. There is no spike to be found.

Twitter is worth several billon dollars more than Line, which is not surprising as Twitter has nearly exactly double Line’s revenue, when comparing their respective first quarter performance. Line is worth more than half of Twitter.

And that’s that, folks, Line is out. Who might be next from the private market here in the United States? Talend and Nutanix are the obvious choices. The more interesting question is what company that is not expected to file this year will. There must be at least one surprise coming.

I hope.

Join thousands of business professionals reading the Mattermark Daily newsletter. A daily digest of timely, must-read posts by investors and operators.

Top Gif From Motherboard, Via Giphy.
© Mattermark 2024. Sources: Mattermark Research, Crunchbase, AngelList.
Shares