Tech IPO clouds clearing after a slow start to the year

Aneri Pattani, special to
Da-Kuk | Getty Images

After a brutally slow start to the year, the technology IPO market seems to be returning to life, with Nutanix skyrocketing in its first day of trading on Sept. 30 and another cloud computing company ready to go public later this week.

Nutanix — whose data center technology combines computing, storage and networking into a single product — soared to more than twice its pricing during its debut Sept. 30, up 130 percent, closing at $37 per share after opening at $26.50. Nutanix shares continued rising Monday, up about 9 percent in midday trading.

The high-flying stock price made Nutanix the first IPO to double in its first day since August 2015. It even outdid Twilio, a cloud communications platform company that rocketed more than 91 percent higher on its first day of trading in June and has since soared more than 300 percent.

Shares of business-management software vendor Apptio are up more than 36 percent since it went public last month.

Nutanix paves way for more IPOs

The success of these venture-based U.S. tech companies is opening up the market for other billion-dollar start-ups to make the IPO leap.

"Tech IPOs are being very well received right now in the market. ... The window has opened up," said Kathleen Smith, principal of Renaissance Capital, which manages IPO-focused exchange-traded funds. "We expect more this year, and we'd imagine some of the larger ones are targeting 2017."

The current surge is a welcome change for the tech IPO market after a very slow start to the year.

Though an estimated three dozen software companies have been privately valued above $1 billion, according to The Wall Street Journal, many major venture-backed companies have stood on the sidelines of the public market this year.

There have been 75 IPO deals so far this year, down from 140 at this time in 2015, EY told CNBC last month.

But that is starting to change, Smith said.

"I think we can say for sure that there's a lot of interest now, contrary to the beginning of the year, in high-growth technology IPOs," she said. "Investors are willing to value high-growth companies as long as volatility is low."

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Coupa Software is looking to capitalize on that trend with its IPO later this week. The company, which provides cloud-based software to help businesses manage their spending, plans to raise $101 million in an IPO on Oct. 6. It will issue 6.7 million shares at a price range of $14 to $16.

In the last year ending July 31, the San Mateo, California,-based company generated $109 million in sales. Founded in 2006, Coupa has 590 employees.

The company seems promising in both the short- and long-term, Smith said.

"We think this is a good business," she said. "They have a lot of visibility and strong cash-flow dynamics that's a long-term thing."

By Aneri Pattani, special to

Da-Kuk | Getty Images