The hugely successful initial public offering of Snap (SNAP) sends a positive message to unicorns and their backers who have worried that the public markets will no longer support private tech valuations. Events such as Square's (SQ) IPO at less than half its private valuation, and an early 2017 stumble in tech stock prices had created concerns about the market's receptivity to highly-valued names.
Even with muffled voting rights and a lock-up period for new investors, Snap's offering was 12 times oversubscribed according to CNBC. Shares priced at $17 each and eventually debuted at $24, giving the company a roughly $33.4-billion valuation that easily topped the $18 billion implied by Snap's most recent round of private fund raising.
"It is a great day for Snap to go public," said Rohit Kulkarni, managing director and head of research at private securities investment outfit SharesPost. "It's even a better day for other companies that are waiting in the wings."
The company is early in its life cycle, given its live of profitability and its level of monetization. "That creates greater risk but is also creates greater potential for upside," Kulkarni said.
"If it holds its IPO value for the next 30 days, that creates a positive aura around those companies thinking about going public of issues over the next 6 to 12 months," he added.
This year and 2018 could be positive years for IPOs, Kulkarni suggested, as 2013 and 2014 were strong following the IPO of Facebook (FB) in May 2012.
Snap was 8th on the CB Insights unicorn registry in terms of valuation. While questions remain about the economic model and profitability, the company has demonstrated that it can lure millennial's eyeballs and ad dollars away from Facebook. Snap is also one of a small pool of social media IPO candidates, Kulkarni suggested, which gives it scarcity value.
Uber is currently the top unicorn, according to CB Insights. Investments by lowercase capital, Benchmark Capital and Alphabet's (GOOGL) Google Ventures value the ride sharing, car-hailing app developer at $68 billion.
Chinese companies like smart-phone maker Xiaomi and ride sharing outfit Didi Chuxing are next with valuations of $46 billion and $33.8 billion, respectively, CB Insights reports. Apple (AAPL) is among the investors that would could benefit from an IPO of Didi Chuxing, having invested $1 billion in the company last year.
Other leaders include Airbnb Inc., with a $30 billion valuation and backing from General Catalyst Partners and Andreessen Horowitz, and Planatir Technologies Inc., which has funds from RRE Ventures LLC and Founders Fund LLC and is worth $20 billion.
While big money companies like Uber and AirBnB will grab headlines, CB Insights suggested that Qualtrics, Blue Apron, Zuora, Okta and Pluralsight are the most likely IPO candidates given their maturity, fundraising history, valuation and other factors, in a study published late last year.
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