Will the biggest tech startups finally choose to go public, or continue to remain by the sidelines like they did last year?
2016 was just a bad year for everyone – from Hillary Clinton’s shocking election loss to Singapore’s slowing economy, no one could have predicted what we experienced. No one, however, was as badly hit as the tech IPO market. Despite the Dow Jones hitting historic highs and Wall Street breaking a number of records, only a handful of technology companies went public. In fact, 2016 continued 2015’s dismissal showing by having the lowest number of overall IPOs since 2009, when the global economy was only just recovering from the Great Recession.
Signs are pointing towards a major return for tech initial public offerings, with analysts predicting that 2017 will be the year tech IPOs lead the way. The only question here is will the biggest tech startups finally choose to go public, or continue to remain by the sidelines like they did last year, which would definitely lead to a major upset.
Changing Times
Despite the concerns Silicon Valley has about President-Elect Donald Trump, stocks are still on their way up since his shocking election win, which will prove to be a boon for any upcoming tech IPO. Moreover, tech companies that braved conditions and went public in 2016 were handsomely rewarded, with tech companies like Twilio and Coupa Software remaining well above their initial valuations.
The combination of a good economic climate and strong offerings by smaller tech companies, are starting to boost investor confidence, as we head into 2017. With the purported upcoming IPOs of several huge social media darlings, analysts say this is the year Wall Street will finally reopen its doors to starving tech startups.
All Eyes On Snap
Investors are looking for the next great tech unicorn – much like how Google and Facebook were when they went public – and there are quite a number of big name with multibillion-dollar valuations just waiting for the right moment.
The most obvious contender right now would be Snap Inc., the developers of Snapchat, which was given a valuation of US$25 billion when it filed for its IPO back in November. With their sights set on besting Facebook (and hopefully not the next Twitter) and a notable shift to monetize their popular app, Snap Inc. seems to be on track to raise billions.
The pressure to do well, however, weighs heavily on Snap Inc. Many technology company are holding out to see how well Snap Inc. does when it goes public, and to watch investor sentiments during that time.
Major Leaguers
Other notable multibillion-dollar IPO contenders include music-streaming giant Spotify, ride-sharing darling Uber, and home-to-home rental service Airbnb. However, the problem facing all three companies is how they can start turning a profit.
Although known by all and beloved by most, take Spotify as a case study, it has continued to burn cash despite its rising revenue stream from its pool of paying subscribers. More than that, in recent years Spotify has been facing a bevy of formidable competitors – with Apple, Amazon and Google being at the top of the list. And unlike these companies, Spotify just simply doesn’t have the deep pockets to continue making huge losses.
With that being said, the current markets are ready and willing to dough out investments, with pent-up demand for tech companies more so since the end of the financial crisis. The key here is getting the pricing right at a pivotal moment, where the first truly successful IPO of 2017 will open the floodgates for more to come.