A miserable week for tech IPOs shows Silicon Valley is still hungover from valuation boom

Key Points
  • Tintri delayed its IPO for a day and then sold shares below the expected range.
  • Blue Apron cut its offer price this week and is trading down.
  • Some private investors in both companies are in the red.
A miserable week for tech IPOs shows Silicon Valley is still hungover from valuation boom

First Blue Apron, now Tintri.

It's been a lousy week for tech initial public offerings, so rough for Tintri that after slashing its offer price, the data storage company is worth about $225 million, or about $35 million less than the amount it raised as a private company.

Tintri, which sells to large enterprises, and Blue Apron, a meal kit delivery business for consumers, have almost nothing in common. Except that both grew rapidly fueled by venture capital, and sold shares this week to an investor base skeptical of emerging tech brands.

For both companies, some private investors are now underwater.

"Clearly there's a fairly negative secular backdrop," said Ken Klein, Tintri's CEO, in an interview shortly after his company debuted on the Nasdaq. "We were a bit guilty by association."

Klein was on the road with Tintri for close to two weeks, holding about 60 meetings with investors in cities including New York, Boston, Los Angeles, San Francisco and Chicago.

The company was intending to sell shares on Wednesday night at $10.50 to $12.50 a share and ended up delaying the offering by a day and selling at $7. It rose to $7.27 as of mid-day Friday.

Blue Apron had planned to price at $15 to $17, but ended up on Wednesday evening at $10. The stock hasn't even been able to hold that price, falling to $9.29 Friday afternoon.

Blue Apron faces challenges getting to scale: Cowen's David Seaburg

The big picture -- Silicon Valley is still hungover from the financing boom that lasted from about 2012 to 2015 and produced valuations that the public markets refuse to honor. On top of that, there's the crisis at Uber, which last week forced CEO Travis Kalanick to resign, leaving big money investors concerned about the ride-hailing company's $68 billion valuation.

According to the Wall Street Journal, there are 161 venture-backed companies valued at $1 billion or more. David Golden, a partner at Revolution Ventures in San Francisco, said the shakeout isn't over.

"Because there was so much capital deployed in the growth equity asset class, it will take a while to reset," said Golden, who previously ran tech investment banking at JPMorgan. "There is a fairly long way to go as it relates to the public markets."

For Tintri's Klein, the IPO serves three purposes even though it bought in less money than planned. The $60 million raised "fully funds our business model," Klein said. Additionally, the offering is designed to raise awareness in the enterprise cloud market and to provide credibility that comes with being public.

Tintri develops flash high-speed storage that helps big companies get the attributes of cloud computing without migrating their data to places like Amazon Web Services. The company serves 1,300 customers, including 21 of the Fortune 100, according to its prospectus.

Nutanix and Pure stock prices

However, it's a costly model and competitors have struggled on the public market. Tintri's sales in the fiscal year that ended Jan. 31, climbed 45 percent to $125.1 million. The company spent $108.9 million on sales and marketing leading to an operating loss of over $100 million.

Nimble Storage was acquired by Hewlett Packard Enterprise in April for 40 percent below its IPO price in 2013. Pure Storage is trading below its offer price from two years ago, and while Nutanix is above last year's debut price, it's well below where the stock ended up after its opening day pop.

"If you're an investor, you're going to say `I've seen this movie before,'" said Golden.