Exclusive: Silicon Valley IPO market boom winding down

Fri Oct 16, 2015 7:06am EDT
 
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By Heather Somerville

SAN FRANCISCO (Reuters) - Last year, many tech IPOs enjoyed soaring valuations in their Wall Street debut, raining cash on the companies and their investors and boosting concerns about another Silicon Valley bubble.

Now, the party is winding down, according to data analyzed by Reuters: Five of the 12 U.S.-based tech companies that went public this year, or 42 percent, priced their shares at a valuation below or nearly the same as their private market value, compared to 24 percent of the 29 that went public in 2014.

"People are no longer out of their minds with valuations and expectations," said Adam Marcus, managing partner at OpenView Venture Partners in Boston.

A recent example is Pure Storage (PSTG.N: Quote), whose IPO earlier this month gave the data storage company a $3.1 billion market cap that almost matched its valuation in the private market.

The shift in the investing climate comes as payments company Square filed this week for its own IPO later this year, becoming one of the most prominent of the so-called "unicorns," or private companies valued at more than $1 billion, to try to go public.

Even when valuations increase, they are growing by a smaller amount, according to the data, which was provided by Ipreo, a market intelligence company, and Pitchbook, a venture capital, private equity and M&A data provider, and analyzed by Reuters. Among the companies that saw their values grow in an IPO in 2014, the median increase from their value in the private market was 61 percent. Some companies saw increases of three-, four- and even five-fold.

So far this year, that gain is 32 percent. The data excludes eight companies that went public in 2014 because there was insufficient information to calculate their pre-IPO valuations.   Continued...

 
Pure Storage Inc. CEO Scott Dietzen (R) celebrates his company's IPO on the floor of the New York Stock Exchange October 7, 2015. REUTERS/Brendan McDermid