Deciphering SPACs and their implications
Wall Street’s dream week, crazy week for the IPO market
IPO market geared up for the busiest week
23 new IPOs were listed at NYSE and Nasdaq combined, making it one of busiest week in Wall street in last few years. Wall street is for visionaries, people who can look forward and measure up the market moves. It’s not for people Reminiscing the past and wallowing in its sorrow. Corona pandemic was past and the recovering economy, potential successful vaccine and rising sentiments among investors are already showing signs. Wall street has always been front runner and rightly so. The last week has seen crazy amount of IPO activity in the market and many more billion-dollar companies are soon to follow.
Snowflake’s share soared on the first day of trading with its valuation doubled from $33 Bn to over $70bn, making its initial public offering the largest ever for a software firm. Snowflake is a cloud computing company, that went public on NYSE on 16th Sep 2020 and raised $3.36 Bn. The overenthusiasm among the investors pushed the first day trading price to $245 — more than double its IPO price — in New York trading. Multiple VC and early stage investors have been able to mint billions of dollars from the IPO. The share got additional traction after the investment interest from Ventures and Berkshire Hathaway.
JFrog a DevOps software development company also went public on 16th Sep 2020 with IPO priced at $44 raising $509 Mn at the company valuation of just about $4 Bn. By end of the day JFrog’s stock soared 47.3%, closing at 64.79. JFrog was reportedly valued at $1.5 billion last year and IPO provided a huge valuation boost to the company. The soaring valuation of the company shows how much the investors are willing to pay for high growing SaaS company.
Unity Software went public with a blockbuster IPO this Friday, with its price jumping 44% by the end of the day. The company raised proceeds of around $1.3 Bn by selling 25 million shares at $52. Its stock raised as high as $76 in early day trading lifting company’s valuation to around $20 Bn. Unity is world famous gaming development studio that is known for hits such as “PokemonGo”, “Call of Duty:mobile” etc. Unity expected its IPO price to be round $34 – $42, but the enthusiasm about the stock among the public helped company go with IPO at $52. Sequoia Capital and Silver Lake were the biggest investors in Unity before the IPO, with Sequoia owning more than 24 per cent. Unity reported loss of $54 Mn this year, even though its revenue is on the rise, reporting $351 Mn earnings last year, 39% up from previous year. Gaming is the fastest growing segment in media category with 2.5 billion gamers worldwide and $140 Bn in revenue which is also consistently rising exponentially.
Sumo Logic: Sumo logic was the third venture backed software company listed this week, on 17th Sep 2020, on the exchange with the price above its anticipated range. The company raised $326 Mn with shares priced at $22, with the day closing at 26.8 a 22% jump in the closing price. Sumo logic is pioneer in continuous Intelligence with applications across digital transformation, cloud computing and analytics. Sumo like many others going public this week has shown solid revenue growth but also equitably growing losses. But the multiple times oversubscription of the company shares and the rising stock price shows the confidence investors have on the company and its growth potential.
Investors are bullish on the market and wall street is riding on the positive wave. Past few weeks have seen strong IPO activity after a long dull period, with 23 new IPO listed on NYSE and Nasdaq just this week. List of IPO listed during this week:
Billions of dollars have changed hands with number of VCs and early stage investors making big exits. Just a month ago when the companies were worried sick about corona and its potential impact on the investments and their portfolio, last few weeks have seen a complete shift in scenario. Sequoia a leading VC was largest owner of Unity, had 8.4% stake in Snowflake and some ownership in Sumo Logic had around $9 Bn worth in these three companies, earning health profits with exits. Many other investors have seen a profitable run and the IPO fever is not expected to end any time soon.
Whatever be the reason, be it the recovering economy from the pendamic, be it the strengthning investor sentiment or be it the esacape from the future political uncertainity from elections IPO market is up and running. U.S. IPOs are having a busy week as 21 companies are expected to price their offerings raising more than $10 billion combined in the coming weeks.
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Listing gains are likely to be capped by reputational concerns around an otherwise enviable product stack.