IPOs 2016: Why tech is the IPO sector to watch

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2015 was an IPO year to forget, but 2016 may be a bit more interesting.

The biggest winners and losers in 2015? What does it say that Biotech dominates the top and bottom performers?


2015 Biggest IPO Gainers

Source: Renaissance Capital

2015 Biggest IPO Losers

Source: Renaissance Capital

Outside of biotech, there were a few notable winners: GoDaddy (up 64 percent from its initial price) or Fitbit (up 48 percent), but they were overshadowed by the many who flamed out, such as Etsy (down 47 percent), Fogo de Chao (down 26 percent) and Party City (down 25 percent).

But by and large the poor market conditions and overvalued IPOs that dominated the first half of the year weighed on the IPO market. Renaissance Capital's IPO ETF (IPO), a basket of roughly 60 of the most recent IPOs, fell nearly 9 percent this year, underperforming the S&P 500.

Then there are the "leftovers," the IPOs that were expected to go public, but never quite made it: SoulCycle, Albertson's, Univision, Nieman Marcus, McGraw Hill Education.

As for 2016, there's one sector that stands out: Tech. There were far fewer tech IPOs in 2015, partly due to the poor IPO market and partly due to the tsunami of private money that kept many from going public.

But that will likely change in 2016: fewer private tech deals, more public IPOs is the likely trend, with venture capital firms — and employees themselves — getting increasingly antsy about an exit strategy. The availability of private funding will definitely be an issue.

Just look at business storage company Nutanix, which announced it had filed its IPO on December 22, a time, it seemed, calculated to get the minimum amount of attention possible.

Nutanix was a CNBC Disruptor in 2015, and if they make it to the finish line would be the third company on the Disruptor list to go public (Square and Pure Storage are the other two).

Another company that recently filed was cybersecurity firm SecureWorks, a Dell subsidiary.

Both Nutanix and SecureWorks could go public in the first two weeks of 2016. The wild card — again — is market conditions.

Equity exchange BATS is another that has already filed. Others that have not filed buy may include Cloudera and student loan refinancer Social Finance (SoFi).

Beyond January, if conditions are right, we could see a big wave of tech IPOs. Dropbox, Snapchat, Uber, Airbnb, Pinterest, Spotify, even Palantir are potential IPOs if the markets pick up.

Will any of these happen? Beyond market conditions, a big question is the burn rate. How fast are you going through your cash pile? Some that are burning cash fast — like Dropbox — may be under more pressure than others. That's where you could see valuation haircuts.


  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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