EDITORIAL

IPOs Ahoy?

Editor’s Morning Note: There is hope that the tech IPO market is poised for recovery. A tech IPO just priced, so it’s the perfect moment to understand why. 

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After all our chatter about past IPOs and their lacking quantity, there is some hope for a pace pickup during the rest of the year–and even more so for 2017 and 2018.

Hope, of course, doesn’t count for much. But it’s time to take a look around and see where we are. Are we on the vestige of real late-stage liquidity?

Maybe. After all, The Trade Desk just set a proposed price range for its flotation.

Media Intrigue

There seems to be a growing narrative in the press that, yes, this year’s IPO market has been slower than sap sliding down a tree, but things are about to pick up.

As we sometimes do, it’s time for a media roundup. First up, VenturesBeat:

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MarketWatch has some optimism as well:

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The SF Chronicle has a mostly positive take:

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And two hits from mid-August that mark the length of the current bout of optimism are worth our time. Here’s Bloomberg:

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And finally, BusinessInsider:

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It’s called a narrative for a reason.

Data Dumps

There are four core names in the IPO mix that you have heard of: Apptio, Nutanix, PointClickCare, and The Trade Desk. They have public SEC docs and are likely to make a real go at an offering.

Following the strong results of the to-date 2016 US-based technology market, it isn’t surprising that more companies are looking to go public. Everyone wants to be the next Twilio. However, Twilio’s path will be hard to repeat.

Why? Because Twilio had growing revenue and falling losses in its filing documents. Not all companies that we expect to go public are lowering their losses as they grow. The market has treated companies with similar metric direction with strict discretion in the past.

To save you some scrolling, here are the core metrics, all measured from the most recent quarter compared to its year-ago period. (Numbers in green are positive, indicating improvement. Numbers in red are negative, indicating deteriorating performance.)

PointClickCare

  • Revenue ∆% YoY: 27.45
  • Net loss ∆% YoY: 592.6

Nutanix

  • Revenue ∆% YoY: 77.82
  • Net loss ∆% YoY: 43.57

The Trade Desk

  • Revenue ∆% YoY: 92.96
  • Net profit ∆% YoY: 95.47

Apptio

  • Revenue ∆% YoY: 22.39
  • Net loss ∆% YoY: 2.54

What should we take away from that? That two of the companies of our four are losing more money as they grow, one is roughly holding its losses flat as it grows, albeit at a slow rate, and The Trade Desk managed expanded its profit while also growing its top line.

So it’s a mixed bag. Varying strength is no sin, but even at all-time highs, it isn’t clear that there is market appetite for offerings that have growing deficits. We’ll see.

This matters for more companies than the final few firms that may go public this year. Instead, if the above-listed cadre flops, it could re-close the IPO window. That could limit 2017 liquidity.

If we aren’t going to see mass unicorn deletion, the market requires the liquidity that IPOs bring.

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© Mattermark 2017. Sources: Mattermark Research, Crunchbase, AngelList.
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