Snap Could Revitalize the Tech IPO Market

Don’t look now, but the tech IPO market may be about to Snap out of its year-long torpor.

The blockbuster initial public offering is expected to kick off a revitalized market this year, encouraging IPO debuts by other unicorns, the privately held start-ups whose hefty venture capital funds have allowed them to avoid Wall Street and the legal requirements of a public offering.

Snap, the Venice, Calif.-based parent of youth oriented Snapchat messaging app, plans to offer 200 million shares at $14 to $16 apiece, giving it a value of $19.5 billion to $22.2 billion, according to a filing Thursday.

Even though that’s lighter than private estimates of its worth — some company executives had eyed $20 billion to $40 billion — Snap’s market entrance would still be huge. It’s in the running to be the third-largest tech IPO in the last decade, dwarfed only by Alibaba Group Holding Ltd. ($25 billion share sale) and Facebook ($16 billion.)

“Snap will be a jolt to the tech IPO market,” says Angelo Zino, an analyst at CFRA Research.

Macroeconomic and geopolitical turmoil that roiled markets last year are expected to yield to an exuberant market trading at record highs and a stream of high-profile companies in the IPO pipeline in 2017. Among the possible candidates: Hootsuite, Dropbox and Spotify. Applications-management company AppDynamics was acquired by Cisco Systems for $3.7 billion days before its scheduled IPO in late January. Hootsuite, Dropbox and Spotify declined comment.

Snap or no Snap, the tech IPO market is poised for a comeback in 2017 after a desultory 2016 — the worst worldwide this decade. Last year, only 53 tech companies raised $8.7 billion in initial public offerings, down 42% and 68%, respectively, from 2015, according to PricewaterhouseCoopers.

“The big question is: Will Snap have Facebook-like growth trajectory after its IPO or Twitter-like growth?” says Minal Hasan, general partner and founder of K2 Global, a venture-capital firm in Silicon Valley. “In fact, Facebook continues to be a thorn in Snapchat’s side.”

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SOURCE: USA Today, Jon Swartz