- Companies across enterprise software, gaming and health tech are set to go public next week in one of the busiest stretches for IPOs this year.
- The stock market has shown surprising strength this year during the coronavirus pandemic, but is poised to wrap up its worst two-week stretch since March.
- "These offerings will succeed or fail based on fundamentals and their business prospects," said Lise Buyer, founder of IPO advisory firm Class V Group.
With Silicon Valley's tech workers stuck inside amid the dueling crises of the coronavirus pandemic and raging wildfires across California, the industry is simultaneously gearing up for one of its busiest IPO weeks of the year.
The biggest names poised to hit the market next week are cloud database vendor Snowflake and gaming technology company Unity Software. They'll be joined by several other enterprise software companies, as well as Amwell, a telehealth provider based in Boston.
Lise Buyer, founder of tech IPO advisory firm Class V Group, said that a bunch of companies that had originally been aiming to debut in April or May put their plans on hold when Covid-19 became the dominant economic story.
With the market bouncing back and tech stocks soaring in recent months, some of those companies restarted their prep work to shoot for the post-Labor Day window, which is often a busy period for IPOs as bankers and investors return from summer vacation.
"They reignited their engines," said Buyer, who worked on Google's IPO in 2004.
Buyer described the coming deluge as "back-to-school week for IPOs" and said the switch to online investor meetings sped things up by a week or two, because companies could cram many more sessions into a single day and meet potential shareholders in parts of the country they would normally skip.
"Roadshows are both shorter and more thorough now because companies can speak with more investors in a condensed period of time," Buyer said.
Going public sooner is more important in 2020 than in most years because investor attention is soon expected to turn to the presidential election, which is less than two months away.
But in their haste to sell shares, tech companies could find themselves bumping up against shifting market conditions. Since reaching a record on Sept. 2, the Nasdaq has dropped more than 9% as of Thursday's close, and is headed for its worst two-week drop since March.
"Volatility is always a concern," Buyer said. "But these offerings will succeed or fail based on fundamentals and their business prospects."
Snowflake is set to be the most valuable of the new IPOs out of the gate. The company, whose data warehouse software helps companies manage and share vast amounts of information in the cloud, would be worth about $24 billion if it goes public at $85 a share, the high end of its current range.
Unity, which produces a 3D gaming engine that powers video games and other program, would have a market cap of just more than $11 billion at the top of its range.
Sumo Logic, a provider of data analytics tools, and JFrog, which builds software for developers, are also riding the cloud software boom and taking advantage of investor demand for emerging growth stories.
Amwell has a more specific Covid-related narrative for Wall Street. The company provides telemedicine services, a market that exploded earlier this year as hospitals filled up with coronavirus patients and virtual visits became a safe way to avoid infection risk. Amwell, which is raising $100 million from Google concurrent to its IPO, said in its prospectus that visits reached 40,000 per day in April, up almost fourteenfold from a year earlier.
Amwell's only real comparison on the public market is Teladoc, whose stock is up almost 140% this year. In August, Teladoc acquired digital health company Livongo for about $18.5 billion, one of the biggest deals of the year.
Venture capitalist Michael Yang said that across the health landscape, there are fewer stocks to buy because of all the acquisitions, leaving investors searching for new opportunities. After Amwell, there are at least a couple more debuts on the horizon this year. GoodRx, which helps consumers access prescription drugs at a discount, and cancer detection start-up Grail, have both filed to go public.
"If you're a mutual fund manager, there aren't that many stocks to put your money in," said Yang, a partner at Omers Ventures. "You have bigger funds with more assets and there's fewer publicly traded health plans, hospitals, and pharmacies. All that stuff has consolidated."
Outside of the tech sector, there are numerous other IPOs scheduled for next week from companies in biotech, real estate, food and beverage packaging and financial services.
Here are the tech companies scheduled to debut in the week starting Sept. 14, ranked by revenue:
- First-half revenue: $351.3 million
- Revenue growth: 39%
- First-half net loss: $51.4 million vs. $67.1 million a year earlier
- Valuation at high end of current range: $11.1 billion
- Ticker symbol: U
- First-half revenue: $242 million
- Revenue growth: 133%
- First-half net loss: $171.3 million vs. $177.2 million a year earlier
- Valuation at high end of current range: $23.7 billion
- Ticker symbol: SNOW
- First-half revenue: $122.3 million
- Revenue growth: 77%
- First-half net loss: $113.4 million vs. $44.5 million a year earlier
- Valuation at high end of current range: $3.5 billion
- Ticker symbol: AMWL
- First-half revenue: $96.6 million
- Revenue growth: 38%
- First-half net loss: $35.8 million vs. $29 million a year earlier
- Valuation at high end of current range: $2.1 billion
- Ticker symbol: SUMO
- First-half revenue: $69.3 million
- Revenue growth: 50%
- First-half net loss: $426,000 vs. $2.1 million a year earlier
- Valuation at high end of current range: $3.3 billion
- Ticker symbol: FROG