CNBC Disruptor 50

Look at all the 2018 tech IPOs that are underwater

Key Points
  • Domo dropped 25 percent this week, while Zuora, SVMK and Elastic each fell by more than 10 percent amid a broad market sell-off.
  • The plunge has left a number of this year's IPOs below their debut price.
  • Bay Area employees, who often swap high salaries for equity in their companies, count on big stock pops when their company goes public.
Zander Lurie, CEO, SurveyMonkey
Scott Mlyn | CNBC

The year-end stock market plunge is hitting one class of companies particularly hard: 2018 tech initial public offerings (IPOs).

Last week's sell-off was unusually steep, with Zuora, SVMK (SurveyMonkey) and Elastic all tumbling more than 10 percent. Domo plummeted 25 percent, Zscaler fell 18 percent and Anaplan declined 12 percent.

Many public market investors who bet on emerging tech companies are underwater in 2018. SVMK is now below its IPO price from September, joining Spotify, Sonos and Domo, which are all trading lower than their debut prices. Dropbox fell 14 percent this week and its 26 percent decline in the past three months has pushed the stock below its initial price in March.

The downdraft for recent IPOs is part of a broader decline in technology stocks that started in mid-September. Younger companies have been hit the hardest as investors question how well they'll be able to hold up if the economy slows and some businesses are forced to deal with a downturn for the first time in their history.

With interest rates rising and a trade war festering, the Dow Jones Industrial Average and S&P 500 are on pace for their worst December performance since the Great Depression.

Beyond what's happening now, the market turmoil could have a big impact on the 2019 IPO class.

The most valuable venture-backed companies have all indicated that they're likely to debut next year. Uber and Lyft have hired bankers and reportedly filed confidential papers to go public. Airbnb, Slack, Stripe and Palantir have all hinted at potential offerings in the next 12 months.

As of early December, J.P. Morgan Chase hadn't seen any of its clients alter their timing or expectations, Noah Wintroub, the bank's vice chairman and head of technology investment banking, told CNBC at a conference.

"We'll continue to see what happens in 2019, what happens on a macro basis, what the market is doing, and if the market is super volatile, people may change their plans," Wintroub said at the time.

A healthy IPO market is important for tech workers across the Bay Area, who often sacrifice high salaries for equity in their companies. Given the lofty private market valuations that software and internet companies have commanded in recent years, they need to go public and see their stock pop in order for many of their employees to reap big rewards.

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