Wall Street Beat: Market turbulence seen as just a speedbump in tech IPOs

TrueCar, Zendesk jump on IPOs as baseline trends continue

Despite a recent selloff in technology stocks, tech IPOs just keep coming and industry watchers appear confident that the trend will continue.

Just Friday, automotive website TrueCar.com and Zendesk, which provides a customer service platform to small and medium-size businesses, went public, and the Wall Street Journal reported that Israeli car tech firm MobilEye has submitted a preliminary, confidential filing to list on the Nasdaq. Recently, Chinese Web giant Alibaba confirmed that it would launch an initial public offering in the U.S.

The list goes on, despite a slump in tech stocks, particularly on the Nasdaq. The Nasdaq computer index is flat for the year, after closing up on Friday.

"The Nasdaq has long been the barometer for tech IPOs," said John Fitzgibbon, who runs the IPOScoop.com website. So from that point of view it's somewhat surprising that the trend for a strong tech IPO continues.

In its latest Global Technology IPO Review, PwC noted that for the first quarter, there were 12 U.S. tech IPOs for a total value of US$1.6 billion, increasing year over year by 100 percent and 71 percent, respectively.

With strong capital markets, venture capitalists chose to exit in the public markets rather than execute a sale with strategic acquirers, PwC said. Barring any significant macroeconomic event, the outlook remains positive, with 24 'known' technology companies in the pipeline -- not counting companies that may have filed for IPOs privately under the U.S. JOBS (Jumpstart Our Business Startups Act) Act.

But tech company financial results for the first quarter were somewhat mixed. That, plus economic uncertainty related to the U.S. recovery, a slowdown in growth in emerging markets like China, and potential ramifications of the Ukrainian crisis, have caused some market turbulence that has especially hit tech companies.

"Tech does appear to be spinning its wheels," Fitzgibbon said.

But underlying trends appear to be stable, which may account for the continuation of the hot IPO market.

For one thing, though markets have been turbulent lately, they are up significantly year over year. The Nasdaq computer index is up 23.37 percent from a year ago, while the broad Standard and Poor's 500 index is up 12.78 percent year over year.

Companies planning IPOs also have a longer time horizon than just a quarter or so, pointed out Bryan McLaughlin, PwC Deals Partner. "The process of going public is measured in a six- to nine-month sort of timeline," McLaughlin said.

Investors remain interested in high-growth companies with disruptive technologies. Internet software and services and software companies dominated first-quarter tech IPOs, making up 62 percent of the IPOs, according to the PwC report.

Software-as-a-service companies are particularly attractive to investors because the subscription-based business model affords visibility into future earnings, McLaughlin said. "And it's these Saas sort of companies that are challenging the traditional vendors," McLaughlin said.

So mixed earnings for traditional vendors do not necessarily translate into caution in investing in companies with disruptive technologies.

What's more, the U.S. equities markets are still the most highly liquid, capitalized markets in the world, and remain attractive to foreign companies, noted both Fitzgibbon and McLaughlin.

There is also at least one major factor in considering a U.S. IPO that is not directly linked to how the markets are doing in any given period, McLaughlin noted.

"Launching an IPO in the U.S. is also about branding," McLaughlin said. "It's telling the market, 'we're here.'"

The recent slump in tech stocks is having an effect. Cloud storage company Box, for example, has delayed setting IPO terms.

Nevertheless, "The IPO pipeline remains robust," McLaughlin said.

At the close of the day Friday, Zendesk was up by $1.86 at $15.25 and TrueCar was up by $1.06 to $10.06. While those are not moonshot numbers, they are indisputably in positive territory.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuesZendeskTrueCar.com

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Essentials

Brother MFC-L3745CDW Colour Laser Multifunction

Learn more >

Mobile

Exec

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers

MSI P65

This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang

MSI GT76

It really doesn’t get more “gaming laptop” than this.

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?