With stocks in a bear market, the prospect of an IPO in 2020 may lose its appeal. But some may stick it out despite the coronavirus outbreak, according to pre-IPO stock trading platform EquityZen…
The New York-based company, whose marketplace trades pre-IPO shares at investments of at least $10,000, reviewed the 200-plus tech unicorns in the United States and created a shortlist of the nine most likely entrants to the public market in 2020.
Much like the public market, the secondary market has been shaken by the coronavirus outbreak. On EquityZen’s marketplace, about 90% of pre-IPO shares are trading at a discount compared to the company’s last round of funding, according to Phil Haslett, the company’s chief revenue officer. Normally, that number is closer to 60%, he said.
“Any company with a physical component—their supply chain will be disrupted pretty significantly through COVID-19. So, we took this into consideration,” he said. Most companies on the shortlist are pure software companies, though EquityZen concedes that it’s possible not all of the companies will test public markets because of the recent sell-off.
Before the pandemic sent stocks nearly 30% off their highs, the 2020 IPO landscape was shaping up differently than last year’s. The IPO stumbles of ride-hailing giants Uber and Lyft and coworking startup WeWork’s slashed private-market valuation lowered expectations for high-flying unicorns. To start this year, investor appetite for companies with unclear paths to profitability has been weak, with online mattress startup Casper reacting to investor pressure to drop its IPO price range ahead of its public debut last month.
To narrow down the list of candidates, EquityZen examined the strength of a company’s board, executives and investors. It also factored in the company’s path to profitability, stated interest in going public and whether it has reached at least $100 million in annual recurring revenue. The shortlist did not take into account tech companies’ performance on EquityZen’s marketplace because, Haslett said, some companies have not done transactions through the platform.
“The list really reflects investor appetite in public markets versus private ones,” Haslett said. “Sometimes, when those decoupled, that’s when you have really unsuccessful IPOs.”
Upon announcing a $106 million funding round that bumped its valuation up to $1.3 billion in 2018, Actifio said it does not expect to raise any more private capital; instead, it sees itself as an IPO candidate. The Waltham, Massachusetts company provides cloud software to help enterprises more efficiently copy and store data. A company spokesperson said this week that Actifio has “really built momentum over the last year,” but that “there’s no way to predict market conditions as we experience the early effects of the pandemic.”
The Palo Alto, California company last year announced plans for a 2020 IPO, then hired a chief financial officer, Herald Chen, in November to move the process forward. “AppLovin is a high growth business with strong prospects and profitability; and therefore, we are in no rush to go public,” Chen told Forbes this week. AppLovin, which is valued at $2 billion, helps mobile game developers publish and market their games.
Last month, Asana made its intentions official when it filed paperwork to go public via a direct listing, following in the footsteps of Slack and Spotify. The San Francisco company is led by CEO Dustin Moskovitz, a billionaire cofounder of Facebook, and most recently raised $50 million at a $1.5 billion valuation in 2018. Asana declined to comment on its plans, saying it was in a quiet period.
Desktop Metal, which designs and manufactures 3D printers, is one of two companies on the list with a business model focused on hardware. The Burlington, Massachusetts company raised $160 million at a $1.5 billion valuation one year ago. At the time, cofounder and CEO Ric Fulop told Forbes it would likely be the company’s last fundraise before an IPO. “We are funded through cash-flow breakeven,” he said.
After a $130 million fundraise that made Druva a unicorn last June, its CEO told computer industry trade magazine CRN it could pursue an IPO by mid-to-late 2020. The Sunnyvale, California company provides data protection software. “We will continue to assess market conditions and other variables,” a company spokesman said this week.
Speculation that the maker of developer tools would go public rose in late 2019, culminating in a report from Bloomberg that the company had hired Morgan Stanley and JPMorgan Chase & Co. as underwriters. The Sunnyvale, California company, founded in 2008, was a late bloomer, raising $217 million of its $228 million total in the last four years. It’s now valued at $1.2 billion. The company declined to comment on its plans.
Founded in 2009, New York-based Sprinklr provides social media and customer experience software. The company has raised more than $220 million at a $1.8 billion valuation, but has slowed its pace in recent years. CEO Ragy Thomas told Business Insider in early 2019 that the company is on a path to going public. But the wait may go on. “Some of the companies on our list are actually relatively old companies like Sprinklr. What we learned from that group was that…
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