Global tech IPOs have been on a slow but steady rise since the first quarter of the year. The third quarter posted stronger results, with 20 tech IPOs and proceeds of US$5.38 billion. Supported by a 43% increase in number of IPOs, proceeds rose 264% over the previous quarter.
Year over year, the number of IPOs increased 82%, and proceeds increased 31%.
Encouraged by the successes of recent IPOs, such as cloud Technology company Twilio in June and messaging app LINE in July, companies that had shelved market launch plans as far back as December expedited the process of readying paperwork for regulators to debut in the market.
Whether this momentum continues in the fourth quarter will be influenced by Fed policy and by how investors react to the outcome of the US election.
Software and Internet Software & Services have accounted for more than half the number of IPOs and close to half the proceeds in the last five quarters. The prevalence of these sectors is due to their comparatively lower cost models, strong top-line or user growth and a clear picture of how these companies will achieve profitability. In Q3, these sectors again dominated, garnering 65% of the offerings and 47% of the proceeds. There were four Internet Software & Services companies and nine software companies listed.
Geographic IPO trends
Again, there was broad geographic participation. China led with nine tech IPOs in the third quarter, followed by six from the US. Europe posted three IPOs, including the largest tech IPO of the quarter. As a result of both pre- and post-Brexit uncertainties, investors remained on the sidelines in the UK where there were no tech IPOs for the third quarter in a row.
Japan and India each had one, with Japan's being the second largest tech IPO of the quarter.
Analysis & opinions
"The rebound we experienced in the third-quarter technology IPO market may hint at a good run for the next few months. That said, IPO proceeds were comparatively low, driven by a larger number of low-value listings. In addition, the absence of large IPOs from major markets like the US could signal that the technology IPO market, while ’open for business,’ may not be at its best."
- Raman Chitkara, Global Technology Industry Leader
"Nine domestic IPOs in Q3 do not yet suggest a strong revival of the Chinese capital market. Regulators still set the IPO rhythms in China, and the introduction of the new major assets restructuring regulation is expected to cool the back-door listings fever in the domestic market. Cross-border IPOs, especially in Hong Kong and the US, are becoming appealing again for Chinese tech companies."
– Jianbin Gao, Technology Industry Leader, PwC China
"US tech IPO activity picked up in Q3 2016 with six tech IPOs raising US$627 million. Companies with large total addressable markets, high barriers to entry, scale, and strong top-line or user growth, coupled with smaller deal sizes and strong after-market performance, led the resurgence in US tech IPOs. We expect this momentum to continue and remain bullish on tech IPOs for the remainder of the year and the first half of next year, despite the presidential election."