Tech Sector Selloff Sends 2015 IPOs Below Issue, Challenges 2016 Tech

|
Includes: ACIA, DATA, HDP, IOTS, LNKD, MTCH, NEWR, NTNX, PSTG, RPD, SCWX, SHOP, SQ, TEAM
by: Renaissance Capital IPO Research

Tech IPOs see a hard road in 2016: Higher volatility, lower returns, contracting multiples

2015 saw the lowest tech IPO activity since 2009, and 2016 is not looking much better. The VIX Volatility Index rose again this week - it has remained above 20 almost every day this year. Consumer-focused tech and internet names like Twitter (TWTR; -32% year-to-date), GoPro (GPRO; -45%) and Fitbit (FIT; -47%) have had well-documented declines. On Friday, weak earnings and lower guidance caused Tableau Software (NYSE:DATA) to sink 50% while LinkedIn (NYSE:LNKD) fell 44% and New Relic (NYSE:NEWR) declined 22%. 4Q15 IPO Match Group (NASDAQ:MTCH) missed its first earnings report as a public company and fell 26% this week. For other high-growth, high-loss tech names, investors ditched their shares before the upcoming earnings announcement, including Hortonworks (HDP; -20% on Friday; -63% YTD), Rapid7 (RPD; -14%; -27%) and to a lesser extent Shopify (SHOP; -7%, -15%). Even Atlassian (NASDAQ:TEAM), which blew out earnings and raised guidance, fell 16% on Friday and now trades below its offer price. High-profile 4Q15 'unicorns' Pure Storage (PSTG; -28% from IPO) and Square (SQ; -4%) are yet more casualties of the selloff. The tech IPOs in the 4Q15 faced intense valuation pushback, but now only three of the nine trade above their offer price, and only one is up more than 4% (Adesto Technologies (NASDAQ:IOTS), which had to slash its valuation). The massive backlog of pre-IPO tech companies and their VCs can only watch in horror and conclude: These are tough times for tech.

Enter your alt tag here

Upcoming tech IPOs

With the exception of quasi-tech company Tabula Rasa Healthcare (Pending:TRHC), the tech sector has not seen a single new filing this year. Notable tech filings from December - Nutanix (NASDAQ:NTNX), Acacia Communications (NASDAQ:ACIA) and SecureWorks (NASDAQ:SCWX) - have waited on the sidelines for good reason. Showing another possible route, Private Company Watchlist member Jasper announced that it would be acquired by Cisco (NASDAQ:CSCO) for $1.4 billion - roughly the same valuation it achieved in April 2014.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.