Tech IPOs hit a low in 2016 (but 2017 could be boom time!)OliverLuft 9th February 2017
Last year was a busy 12 months in terms of tech business manoeuvring. The big moves, however, were takeovers, mergers, launches and collapses – there didn’t seem to be that many public offerings.
Much of the movement in 2016 was established businesses buying content firms or platforms that provided a link to sizeable audience. Verizon bought Yahoo for $4.8bn, Microsoft paid $26bn for LinkedIn, and we also looked at telco convergence generally. Yet, other than flagging up the expected IPO of Snapchat, Tech IPOs didn’t seem to impact the media world in 2016 to such a degree.
Now, thanks to a study from PwC, the reasons for that have become somewhat clearer – as 2016 marked the decade’s low point for global tech IPOs.
Just 53 technology companies completed IPOs in 2016 to total proceeds of $8.7bn. According to PwC, following two strong years (there were 118 IPOs in 2014, 92 in 2015) last year marked a 42% year-on-year decline in volume and a 68% year-on-year decline in proceeds.
Internet software and services and the software subsectors remained the growth engines for tech IPOs in 2016, with 32 offerings that raised $4.7bn in total. However, even this represented a falling off compared to the growth these two areas witnessed since the start of the decade .
There were no tech IPOs in the UK last year while across Europe there were ten, raising $3.7bn between them. This total was largely aided by the year’s largest IPO when digital payments company Nets A/S raised $2.4bn and led Europe to be the only global region to avoid a year-on-year decline in proceeds.
In terms of number of offerings, China led the way with 18 tech IPOs, with aggregate proceeds of $1.4bn, and the US registered 16 for total proceeds of $1.8bn – down significantly on the $8.4bn proceeds generated in the US in 2015.
The lack of IPOs in the UK and a reduction in the US might, in part at least, be explained by last year’s Brexit vote and the bitterly contested US Presidential election.
“The combination of uncertain market conditions, high private valuations and ample cash caused many companies to wait until public markets offer a more favourable environment,” said Raman Chitkara, PwC Global Technology Industry Leader. “Looking ahead, the market rally of the past few months bodes well for a healthier global tech IPO market in 2017.”
The market rally in the latter part of 2016 was indeed sharp, with PwC claiming an almost three-fold jump in the proceeds from the first six months. In fact, Venture Beat has already identified 31 tech companies it thinks could go public in 2017, which it predicts could be another boom year.
Many companies who offered an IPO in 2016, Venture Beat said, had customers that were other businesses. The difference in 2017 – and what might make it a significant year – is that many of the firms it believes are poised for an IPO are already household names that serve millions of customers.
At the top of this list is Airbnb, but also included are Dropbox, Glassdoor, Pinterest, Spotify, Uber, and a little thing called Snap (formerly Snapchat), which reports suggest could seek to raise as much as $4bn through an IPO.
If that last one comes off, 2017 will indeed be boom time and 2016 will be seen as nothing more than a blip in a continuing trend to take tech businesses public.