As 2016’s Tech IPOs Notch Higher Gains, Are Market Conditions Finally Right?

Editor’s Morning Note: Market conditions are supposedly slowing the IPO market. That sounds like bullshit.

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The 2016 tech IPO crop is in the midst of an impressive debut.

In fact, Mattermark recently checked in on the group of former startups, finding their performance winsome to-date. However, if the collection of newly-public concerns was doing fine before, it’s now doing doubleplusfine.

The morning’s raw numbers are fun: Acacia Communications is up 9.23 percent (in addition to its strong post-earnings rally), Talend is up 17.70 percent, Twilio up another 10.87 percent, and even SecureWorks is up 1.21 percent.

Here’s our chart from the 10th:

Screen Shot 2016-08-15 at 8.59.22 AM

And here’s the same chart updated with current numbers:

Screen Shot 2016-08-15 at 9.00.13 AM

As you can see, earnings season continues to have an impact on the share price and post-IPO performance of our cadre of securities.

Given the strong performance of those companies, you might wonder why their brethren are not working overtime to take advantage of the liquidity window that the market appears ready to provide. There are three reasons, I think:

  1. The obvious availability of late-stage capital.
  2. The inability of some unicorns to match the financial health of the above-listed companies.
  3. The presumption of adverse market conditions.

The first point is self-evident following our nearly obsessive coverage of the venture capital market, while the second and third are more interesting.

The Case Of MapR

MapR raised $50 million last week, bringing the Hadoop shop’s total capital raise to $224 million. Given its capital base and age—the company was founded in 2009—you might presume that it is prime IPO fodder. It is.

In February, the company said that it “just had [its] best quarter ever.” At the same time, MapR indicated that it would pursue an IPO when “the market conditions are right.” Fair enough.

Half a year later, and $50 million more under its belt, the company is still thinking about an IPO. Commenting to TechCrunch’s Ingrid Lunden at the time of its new capital injection, MapR continued the IPO shuffle:

Screen Shot 2016-08-15 at 9.24.09 AM

I don’t have any particular insight into the company’s current financial performance, but the MapR situation is interesting. The company’s comments over the past year imply consistently improving P&L numbers at the same moment when recent IPOs are doing very well, and markets are at all-time highs.

And MapR isn’t pulling the trigger for another few quarters at least. What’s next for companies that are less financially mature? There is no guarantee that markets will still be at all-time highs in six months or a year. And there is no real promise that private, late-stage capital will always be readily available.

I don’t know. I’ve heard that we’ll see lots of 2018 IPOs, or lots of 2017 IPOs, or lots of filings coming either yesterday, three days ago, or four months from now. Journalist Sarah Lacy weighed in this morning on the topic:

Screen Shot 2016-08-15 at 9.29.51 AM

Perhaps. Don’t count your S-1s before they price and so forth. But at some point, founders that are looking at an eventual IPO must realize that the market doesn’t always set new highs.

Forget hay and sunshine, make IPO while the stock ticker is green.

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