AppDynamics (APPD) is set to be the first "unicorn" of the 2017 IPO market. The provider of application optimization software is on the IPO calendar for next week.
AppDynamics' deal dynamics
AppDynamics' IPO appears structured to do well right off the bat; its $132 million deal size is just 7.5% of its diluted market cap of $1.75 billion, or 9.5% of the basic market cap. At the $11 midpoint, the post-IPO valuation is below its Series F round at $13.71 in the 4Q15 ($1.9 billion market cap).
Tech IPOs from 2016 have averaged a gain of 38%, making technology the top-performing sector of the year. IPO investors showed interest in high-growth tech stories, even those with high near-term losses, provided they come at a valuation gap below publicly traded peers. Returns are even stronger for 2016 IPOs with enterprise software, up 52% on average, while the three with billion-dollar IPO valuations (Twilio (NYSE:TWLO), Coupa Software (NASDAQ:COUP), Nutanix (NASDAQ:NTNX)) each priced above the range and popped 85% or higher on day 1.