Trader Talk

On 'cloud' nine: Tech names set to float in short window

Twitter CEO Dick Costolo takes a photo with his smartphone at the Twitter IPO launch.
Adam Jeffery | CNBC

Traders are about to enter initial public offering offering (IPO) heaven. Over the next two months, dozens of technology companies are set to go public.

Thus far this year, there has only been one tech IPO. Market watchers who saw a tsunami of IPOs in cloud computing and software in 2013 have been scratching their heads, wondering if there will be more.

There will be. Beginning in March, an avalanche of tech IPOs will be upon us.

It may not seem so, but it's already been a fairly busy year for stock flotations. There have been 38 deals year to date— second only to the year 2000, according to Scott Sweet at IPO Boutique. However, the majority (20) have been biotech/medical deals.

So why does the IPO market seem so quiet? Because though the numbers have been large, deal size has been relatively small, with many in the $50 million to $100 million range.

That may be about to change. The biotech/medical sector is now giving way to a tsunami of tech IPOs that will be coming in the next couple months. The red-hot spaces now are: 1) cloud-based software and 2) software as a service. There are also a few consumer-oriented companies that offer coupons or games.

A small deal priced overnight, in the red-hot data security space: Varonis Systems (VRNS), which is a software platform that allows companies to analyze data security and other aspects of their digital business. The company priced 4.8 million shares at $22 per share. The price talk on the deal was originally $17-$19, then raised to $19-$21, before pricing at $22.

The biggest deal by far in the next two months will likely be the first major Chinese IPO of 2014: This is the Amazon of China, the largest online direct sales company in China with over $10 billion in revenue. The deal size is $1.5 billion, three times the size of the next largest deal, King Digital (see below).

Consumer-oriented tech companies will be prominent in March. Already, S-1's (the initial registration form for new securities, required by the SEC) have been filed for several big names, including:

1) (COUP), the leading digital network of printable, online coupons, will likely begin trading next Friday;

2) Sabre, a travel and tourism site which own Travelocity. Backed by TPG and Silverlake, this is a large offering at $750 million; and

3) King Digital Entertainment (KING), makers of the popular Candy Crush game, the largest game developer on Facebook, also a large offering at $500 million.

Lovers of anything with "cloud computing" or "software as a service" in its description will have plenty to chew on shortly:

1) Paylocity (PCTY), cloud-based payroll and human capital management software;

2) Rubicon Project (RUBI), a digital ad exchange that exists in between publishers of websites and buyers of advertising;

3) Castlight Health (CSLT), a platform to help employers who want to become self-insured. This company is being carefully watched: they have less than $20 million in revenue, but may open with a $1 billion market cap. One of the co-founders (Todd Park) was a co-founder of athenahealth;

4) Amber Road (AMBR), cloud-based global trade management software;

5) Q2 Holdings (QTWO), cloud-based virtual banking software;

6) Rimini Street (RMNI), enterprise software support services;

7) Aerohive Holdings (HIVE), cloud-based WiFi and routing products;

8) Borderfree (BRDR), e-commerce software to U.S. retailers to market and sell to customers worldwide;

9) 2U (TWOU), a cloud-based software for online educational content; and

10) A10 Networks (ATEN), network technology that optimizes data center performance.

There are also a small group of non-tech companies that will go public, including:

1) La Quinta Holdings (LQ) one of the largest budget hotel operators in the U.S., which is backed by Blackstone;

2) Ally Financial (ALLY), the leading global auto finance company, formerly a unit of GMAC, which filed for a $500 million offering way back in 2011 and may finally be ready to go public.

These are only those who have already filed S-1's indicating they will likely go public shortly. The NYSE has prepared dozens of pitches to companies that are looking to go public, but have not yet filed a public S-1.

By CNBC's Bob Pisani