Technology IPOs May Face Delays, Lower Values After Stock Rout

(Bloomberg) -- The months-long sell-off in technology stocks has started to cast doubts on the prospects of companies that have yet to go public.

While initial public offerings in the tech sector have performed better than new issues overall in 2018, analysts surveyed by Bloomberg said recent volatility could result in lower valuations for names expected to debut in 2019. The high-profile group of IPO candidates includes such "unicorns" as Uber Technologies Inc. and Slack Technologies Inc. Smaller companies may even delay their offerings until the market environment is seen as safer, they said.

“Whatever these companies thought they might be worth a year ago, they’re worth less now,” said Kathleen Smith, a principal at Renaissance Capital. She said the issue would be particularly acute for tech companies, which tend to be priced on future growth prospects.

The weakness extends to some of the biggest debuts of the year. Among notable tech IPOs, GreenSky Inc. is off by more than 60 percent, while Sonos Inc. and SurveyMonkey parent SVMK Inc. are both below their listing prices. In all, just 43 percent of 2018 IPOs are currently trading above their offering price, according to data compiled by Bloomberg.

“Great companies will always find an audience," said Mark Lehmann, president of JMP Securities. "There’s so much interest around a company like Uber that it could go public in any market. But there’s a higher bar now, and the days when you could see growth slow from 50 percent to 20 percent and you could still raise money -- those days are over.”

Read more: Uber Undeterred as Traders Abandoned IPOs During Rout: ECM Watch

He said the slowdown hasn’t been so severe as to make him alarmed, but “if we have another quarter like this, companies will question what they want to do. You can raise money in a lot of different venues, and they may find that going public isn’t the best choice.”

©2018 Bloomberg L.P.