The tech IPO bubble is back and is getting bigger with time. Twitter’s IPO is the most talked about subject right now, but Twitter is not the only one to join the IPO bandwagon this season. The latest news maker is the Israeli DIY website builder Wix. The company with offices in the United States and Israel is planning to raise $119 million with the opening price of $16.50 per share. Though it does not come close to Twitter’s per share cost of $26 it is definitely a one of the biggies of the season to debut on NASDAQ. The tech IPO bubble did burst before and there have been enough blood on the floor but with so many companies making it big after going public recently more and more companies are willing to give it a shot.
Some of the other brands that jumped into the tech IPO bandwagon recently:
• Freelancer.com- They will be listed in Australian Stock Exchange by November 15. However, they have only placed 6.9 per cent of their overall shares and aim to raise $15 million to boost their overall expansion. However, CEO Matt Barrie will be holding 46 per cent of the stocks.
• FireEye- This cyber security company on September 20th debuted at $20 per share, and closed at $36 in NASDAQ. In total they raised $304 million proving the confidence that investors have in security companies.
• Ring Central- They Company deals with mobile, fax and e-mail communication management offered $7.5 million shares at $13 per share raising $97 million in New York Stock Exchange.
• Chegg- This online textbook rental company is hoping to raise $172.5 million in its initial public offering at New York Stock Exchange with the stocks priced at $9.50 to $11.50 per share.
• Veeva Systems- This enterprise cloud provider for life science companies raised around $217 million in New York Stock Exchange. The best part was that they closed at $37.16 when the initial price was just $20 on October 16.
By going public these companies can raise billions of dollars that can be really helpful to not only expand their businesses but to reach a wider audience. Companies like Twitter and Wix are almost indispensable in terms of their offerings but not profitable yet. Twitter’s net loss widened to $64.6 million in the third quarter from $21.6 a year before. Wix on the other hand incurred a loss of $18 million in the first nine months of 2013. Hence, their main focus is not to make profit, but to increase revenue and become a platform for other small business to bring their visions to life. Twitter raised its targeted range from $23 to $26 per share which proves the level of trust that investors have upon tech companies. One thing that has not changed is the making of millionaires and billionaires out of tech IPO bubble. For every company going public; the founders, directors and senior employees stand to make substantial financial gains.
Is it a good thing?
For now it is a good thing as tech companies are rising again and investors seem to have regained their faith in the industry which is a great news for the economy and job market. However a trend that seems to be becoming ubiquitous now is going public without ever making any profit. Focus on gaining market share instead of profit margin can be a good idea but one needs a visionary leader like Jeff Bezos to guide the the company in the right direction. No matter how great the future plans look and how efficiently these tech companies manage their growth investors will look for returns sooner than later. Stock prices going down in the market can quickly tumble even the giants. The toughest question for some of these companies going public will be whether to concentrate on monetizing their services and platforms immediately or to provide the best value and user experience to their customers and users. The balance is often a very delicate one and missing the mark even slightly can result in either user uproar or investor pressure.
Which of these companies do you think will emerge winners in the public market? More importantly we will wait to see how long the tech IPO bubble will last. Until then its the proverbial “make hay while the sun shines” for all tech companies.