Social media firm Snap Inc. may be the highest profile tech IPO planned for 2017, with the potential to raise billions.
But more than a dozen expected stock offerings of relatively obscure software firms targeting business customers —little-known names such as Apttus, Tintri and Okta — could be just as important in thawing a long-frozen IPO market, according to investment bankers and advisers who work on initial public offerings.
Such firms are a “leading indicator” of broader investor demand for market debuts, said Justin Smolkin, head of Americas technology equity capital markets at UBS Group AG.
“They tend to be viewed as cream of the crop, and where investors make the most money,” he said.
Such enterprise software companies generally sell their services through subscriptions that produce reliable revenue streams.
Predictable returns
They aim to sign contracts lasting several years, giving investors more predictable returns than many Internet or consumer-oriented companies that depend on advertising or high volumes of individual transactions.
The firms provide a range of back-of-the-house services, such as automating business processes, accounting, training software and expense management.
Although such companies have moderate valuations, between about $500 million and $4 billion, the sector accounts for most of the tech IPO market, said Will Connolly, Goldman Sachs Group Inc’s head of U.S. technology equity capital markets.
“Most of the technology IPO activity is actually not big, large-cap companies going public,” Mr. Connolly said. — Reuters
