Allera Capital the global asset management firm based in Hong Kong and Tokyo believe the current volatile climate is the main culprit to the slowing down of IPOs. Companies want to go public when the market is bullish and are understandably wary when it’s not.
With only 45 companies joining U.S. stock exchanges from July to the end of September, the IPO market looks bleak, especially the Tech sector. Last year saw 304 IPOs which was a 14 year high; however it’s highly unlikely those figures will be matched this year. CB Insights, which follows venture capital investments, had originally singled out around 600 technology companies that they believed at least had a slim chance to go public sometime in 2015. The fact is however, few have.
Last year’s third quarter generated $38 billion with 68 IPOs, the stand out IPO being Alibaba the Chinese based company that saw a record $25-billion generated. By comparison this third quarter has seen only $7.3 billion raised, which equates to just over 50% of 2014’s figures once Alibaba has been excluded. Since Alibaba’s IPO its shares have hung around $65 which is $3 lower than the IPO price, they did briefly hit $115 last November but this just adds another question to the timing and Tech IPOs have been reluctant to take the big step forward at this moment in time.
September is often awash with IPOs, but the volatile stock market and many still wary of China sidelined offerings. China's Shanghai composite index fell more than 40% from its mid-June peak and closed its doors to new IPOs.
It’s not all doom and gloom for Tech companies and many are continuing on the private equity route. In the first six months of 2015, more than 100 venture-capital-backed companies received at least $100 million through private placements, five times the number that issued IPOs. Corporations, especially in Asia, have been big funders. As have mutual funds and private equity operations starved for even slim growth in a low-yield environment.
Allera Capital’s senior analyst said “we expects the tech IPO market to bloom again before too long as there is too much riding on a lot of companies out there, Uber is a good example, they can’t continue to fund their expensive operations via private investment indefinitely”.