The IPO market has an appetite for tech, but only if issuers can swallow the price they're offered.
Each of Thursday's three high-growth IPOs priced below the midpoint and traded up. Even excluding "fintech" payments processor Square, the 4Q15's tech IPO count has jumped to seven, up from five by this point in the fourth quarter last year and just one in the entire 3Q15.
On Thursday night, Noble Midstream Partners LP (NBLX), congatec (CONG) and Truck Hero (TRUK) postponed.
Three high-growth IPOs post a range of positive returns
Jack Dorsey's Square (SQ) slashed its price by 25% from the midpoint to $9 - below the $11 Series D round in 2012 - and proceeded to trade up 45% on high volume (1.7x the float). Its projected growth is about twice that of the payment processor peer average, but investors likely demanded the valuation haircut to offset risks associated with its transition to profitability. While IPO "downrounds" have not been uncommon for recent biotechs, Square's decision to discount is certainly notable for its size (42% below 2014 Series E) and initial success. And its cut is not surprising, given the returns of other high-profile "unicorns" this year (Box: -4%, Etsy: -46%, Pure Storage: 2%). Several more may need to follow suit in 2016
Profitable online dating company Match Group (MTCH), which owns Match.com, OkCupid, Tinder and PlentyOfFish, priced at the low end of the range to raise $400 million and traded up 23%. Parent company IAC has been getting less love - the stock has traded off 12% in the past month, and barely moved on Thursday.
The smallest of the three, Mimecast (MIME), also priced at the low end and raised $78 million. It first traded up about 20%, but then broke issue in the afternoon and finished the day up just 1%. The email security and archiving solutions provider has high growth and the ability to turn a profit, but has also been dogged by foreign currency exposure.
Recent IPOs have priced down and outperformed
IPOs in the past 90 days have an average return of 11% (including +3% aftermarket), trending much better than IPOs prior to September (-9% total; -21% aftermarket). In addition, 67% of IPOs over the last 90 days are trading above issue compared to 37% for pre-September IPOs.
Tech IPOs in 2015 average a total return of 1%, largely held down by 1H15 deals MaxPoint (MXPT; -85%), Apigee (APIC; -58%) and Etsy (ETSY; -46%). The seven tech IPOs in the past 90 days average +8% and each trades above the offer price, albeit under 5% for three.
