Tech Unicorns Rushing to Go Public Defy Sleepy Summer Season
(Bloomberg) -- Forget merger Monday. The start to this week instead saw a flurry of companies file to go public as unicorns gallop to market, waking up what’s usually a sleepy end to the U.S. summer season.
Five software companies joined the rush: Unity Software Inc., Sumo Logic Inc., Jfrog Inc., Snowflake Inc. and, filing for a direct listing instead of a traditional initial public offering, Asana Inc. All of them filed with the U.S. Securities and Exchange Commission, revealing their financial results for the first time.
Also filing Monday were financial adviser StepStone Group Inc. and at least four biomedical companies, a telemedicine provider and four blank-check companies -- one of them led by Paul Ryan, the Wisconsin Republican who was Speaker of the House.
Ant Group, China’s largest online payments platform, followed Tuesday, filing in Hong Kong and Shanghai for a landmark dual-listing that could raise $30 billion at a valuation of about $225 billion, the largest debut on record.
While investors and dealmakers have traditionally associated Monday with acquisition announcements, the volume of those deals has sunk this year with travel restricted because of the coronavirus pandemic and financiers wary of new situations.
Equity issuance, on the other hand, has sprung back from an initial pandemic-induced lull with a vengeance, with special purpose acquisition companies, or SPACs, leading the charge. July, with almost $19 billion in new listings, was the busiest month for U.S. IPOs since September 2014, when 36 companies went public raising $33 billion, according to data complied by Bloomberg. IPO volume, including SPACs, in usually languid August topped $16 billion as of Monday, the data show. The three highest summer months on record were this June, July and August.
Software companies have been a small yet lucrative segment for U.S. IPO investors. This year, 18 of them have gone public raising a combined $5.5 billion. They were up 91% from their offer prices through Monday, based on a weighted average, compared with 53% increase for the 125 listings overall, excluding SPACs.
“Investors are seeking to deploy capital where there is a high rate of growth and a durability to that growth,” said Ashley MacNeill, Morgan Stanley’s co-head of technology equity capital markets for the Americas. “This is the busiest summer, bar none.”
Asana filed for what could be 2020’s first direct listing. The alternative route to a listing offers companies a way to go public without issuing new shares to raise capital, while usually providing investors a chance to sell their holdings without waiting for a lockup period to expire.
Venture capitalist Bill Gurley, among others, has advocated for direct listings, arguing IPOs leave too much money on the table -- as evidenced by the first-day pop in trading debuts. Asana is the first company to file for a direct listing since Slack Technologies Inc. used it last year. Palantir Technologies Inc., which said it’s planning a slightly modified version of a direct listing, may be close behind.
Software Summer Surge
|Asana||Workplace management software||Morgan Stanley, JPMorgan, Credit Suisse, Jefferies||Direct listing||NYSE||To be determined|
|Unity Software||Software to develop video games||Goldman Sachs, Credit Suisse||IPO||NYSE||U|
|Snowflake||Cloud data platform||Goldman Sachs, Morgan Stanley||IPO||NYSE||SNOW|
|Sumo Logic||Cloud software platform||Morgan Stanley, JPMorgan||IPO||Nasdaq||SUMO|
|JFrog||Toolmaker for software developers||Morgan Stanley, JPMorgan, Bank of America||IPO||Nasdaq||FROG|
Ant Group, the crown jewel of billionaire Jack Ma’s Alibaba empire, said in its listing documents that it processed 118 trillion yuan ($17 trillion) of transactions in the 12 months ended in June and has more than 711 million monthly active users.
Executive Network Partnering, with former Speaker Ryan as chairman, seeks to raise $300 million in a listing. Almost two in five IPOs this year has been a SPAC, Bloomberg’s data show, making the once uncommon listings a driving force in M&A.
Monday’s biggest deal, in fact, was the acquisition of driverless car startup Luminar Technologies Inc., backed by tech billionaire Peter Thiel. Luminar announced Monday morning that it’s going public via a merger with Alec Gores’s blank-check firm Gores Metropoulos Inc. Thiel is also a co-founder of Palantir.
There are more listings to come ahead of and after the U.S. election on Nov. 3. Airbnb Inc. announced this month that it had filed confidentially with the SEC for an IPO, a long-awaited move for its early employees and investors.
In all, 112 companies have announced listings on U.S. exchanges this year that are currently pending, according to the data compiled by Bloomberg. They include companies such as Corsair Gaming Inc., which filed its IPO plans Friday, and Chinese electric-vehicle maker XPeng Inc., which is set to price its offering for up to $1.11 billion on Wednesday.
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