Techs Squeeze in Listings Before the Holidays

Six technology IPOs priced last week, with mixed results.
Vincent RyanDecember 15, 2014
Techs Squeeze in Listings Before the Holidays

Last week saw the greatest number of tech IPOs for a week since 2000, but they weren’t all warmly embraced.

Three tech companies had very strong debuts, recording “first-day pops” of more than 40%: Hortonworks, LendingClub and New Relic, according to IPO ETF manager Renaissance Capital. Fast-growing Hortonworks, which leaped 65%, supports Hadoop, an open-source software framework used to manage data.

LendingClub raised the most in its deal, $870 million, and still jumped 56%. “The peer-to-peer lending marketplace is the first IPO out of a group of online alternative lenders looking to go public,” says Renaissance Capital. (On Deck Capital, a lender to small businesses, is scheduled to price next week.) Third-best performer New Relic, an application performance provider, rose 48% on day one.

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As Renaissance points out in its weekly report, other tech deals met resistance. Shares of Momo, Chinese developer of a location-based meeting app, rose 26% at first but by the end of the week had fallen 11%. The app has 60 million monthly active users and partnerships with Alibaba and 58.com.

The biggest disappointment of the week in tech was Connecture, whose shares priced at $6 below the initial range. “Though its health insurance distribution software is used by several major customers, including Medicare.gov, relatively low gross margins (40% in the third quarter) and the recent loss of a contract with Maryland may have weighed on sentiment,” Renaissance says.

Workiva, formerly named Webfilings, also limped out of the gate. The Ames, Iowa, company’s software allows businesses to file Securities and Exchange Commission reports digitally. It shares fell 2% on Friday. “Its suite of data-linked applications is used by 2,100 customers, including Coca Cola, Wal-Mart and Google, but the high market share of its SEC filings product could limit future growth,” says Renaissance.

Outside tech, IPOs did particularly poorly last week, with James River Group Holdings, Metaldyne Performance Group and Avolon each posting returns of 1% or below.

Next week, the final week for IPO pricings of 2014, six companies are expected to price initial public offerings. Besides OnDeck Capital, there are three biotechs (Juno Therapeutics, Bellicum Pharmaceuticals and S1 Biopharma); one energy master limited partnership (Rice Midstream Partners LP); and a Louisiana bank (First Guaranty Bancshares).

For 2015, according to a Monday report by PricewaterhouseCoopers, capital market conditions will continue to be favorable for newly listed public entities. Private equity deals may be a large driver of deal volume.

“With a hyper competitive market for quality assets, private equity firms are continuing to explore their options to exit current investments through various means, including the IPO market,” said Andrew Cristinzio, PwC’s U.S. private equity leader, in a news release.

Financial sponsors backed 61% of IPO volume and 71% of IPO value in 2014, estimates PwC.