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2019 Tech IPO Winners and Losers – Part One

The winner (and loser) is… Uber.

And… Zoom. Despite its directional uniformity and clear dispersion, the chart below of 2019’s tech IPOs isn’t much to go on for sorting the winners from the losers. 2019 Tech IPOs – Share price percentage change – IPO to 12/31/19

What makes an IPO successful?

There are two obvious ways to think about the success of an IPO.

  • From the perspective of the issuer, an IPO is a fundraising event that also establishes a liquid secondary market in the company’s shares. So for issuers, raising the most money at the best price – while still getting the deal done and establishing a secondary market – is a win.

  • From an investor’s perspective, an IPO is an investment opportunity that comes with risk (shares in a company that’s never been public before) but with a non-scientific offset (the institutional “IPO discount” that Venture Capitalists love to whine about). For investors, producing the biggest aggregate dollar gain on an IPO investment is a win.

And for both issuers and investors, IPOs – as opposed to, say, direct listings – represent a rigorous price discovery exercise. There were 26 tech IPOs of any size or consequence in 2019, not including Beyond Meat and Smile Direct (which aren’t tech) but including Slack (which is tech but didn’t do its IPO regular way). Together they raised $20 billion in proceeds (a normal year could be $7 – $10 billion).

As we can see below the biggest win for issuers, and therefore the biggest loss for investors, was Uber. By a mile.

2019 Tech IPOs – IPO proceeds vs. percentage change in stock price from IPO to day-one close

Uber raised more than $8 billion at a valuation about 7% above the company’s value the very next morning, and about 50% above its value on 12/31 – but it still got done! Unlike, for example, WeWork.

Conversely, investors in Uber’s IPO lost about $540 million overnight between the IPO’s pricing and first trade, and have lost almost $2.8 billion in aggregate to date. That is tapping the capital markets to advantage!! The biggest winner overall for investors was Zoom Just as obvious as Uber’s first-place finish on the y axis above is Zoom’s win on the x axis below. Zoom finished behind CrowdStrike on its first day, but Zoom was a bigger deal ($851 million vs $612 million) and Zoom held its value to year-end better than CrowdStrike (up $6.04 from the day-one close, vs. CrowdStrike down $8.13 from day-one close), making it the best buy-and-hold of the year for investors. That is leaving money on the table. 2019 Tech IPOs – IPO proceeds vs. percentage change in stock price – at 12/31/19

Zoom had the greatest share price increase from its IPO (89.0%) AND by far the largest aggregate dollar gain on shares sold in the IPO ($758 million). Zoom was successful because it was big (6th in size after Uber, Lyft, Pinterest, Pelton, and Chewy), it opened way up (80.6%), AND its stock appreciated as others declined.

Conversely Zoom’s capital was effectively much more expensive than Uber’s, so Zoom was a winner, and a loser as well. Tech IPOs – By Percentage Change in Stock Price IPO to 12/31/2019