• Triton

Unless you are a misfit toy, this tech IPO market is just fine.

Much prognosticating this week about the closing of the tech IPO window, but the table below tells a different story.

Normal tech companies that are actually tech companies seem to be doing just fine, both getting their IPOs done without drama and in aftermarket trading.

When we say “tech” companies, teeth-straightening companies, and talent agencies, and fake hamburger companies don’t count (but we are generously including exercise-bicycle and co-working companies because they seem to have convinced pre-IPO investors to give them tech multiples).

Three SaaS IPOs in the last two weeks – Datadog, Ping Identity, and Cloudflare – priced well, opened well, have traded ok given the adverse tape, and are now up meaningfully but between 10% and 20% off their highs as of today’s close.

They join six similarly-situated SaaS companies that went public earlier this year.

And two out of three online retailers plus Pinterest are hanging right in there.

So what does this tell us?

It says that IPO investors are more likely to understand and buy your IPO if you have a familiar product and recognizable business model, and you do your IPO regular way.

By contrast, the misfit toys are easy to spot:

  • Huge, loss-making, opaque “state of consciousness” companies with Gulfstreams and surfing outfits and more on the company ticket.

  • Chinese or African companies subject to trade-war and other uncertainty factors.

  • Marketplaces that theoretically have no fixed product costs but are nonetheless opaque and subject to brutal competitive marketing pressure.

  • Fitness hardware companies that kinda break even on the hardware they sell to rich people like hedge fund managers, and will maybe make money on subscriptions one day – all for the low low fully-diluted price of $11 billion.

  • Well-known SaaS companies that should trade like the SaaS peers but decide to own-goal by forgoing both the traditional investment marketing process AND many hundreds of millions in IPO proceeds – all to make sure a few investment bankers don’t make a hard-earned fee.

For the next Datadog, it’s easy to predict smooth sailing. But the question is when will we see the next Datadog? Many of the names investors were most eager to see have gone through the window already. And some notable names that remain may have new thinking to do. Compass, Postmates, DoorDash, Airbnb, Palantir, and Poshmark may all see some adversity in the recent comps to give them pause.

Maybe best for everyone if the remaining misfit toys take a break through the holidays.