Global technology IPO Review: Q1 2017

Led by two Unicorns, the global tech IPO market starts on an optimistic note in 2017

A resurgence of tech IPOs after a soft 2016

Following a challenging previous quarter, Q1 2017 saw a flurry of activity in technology IPOs. Both deal volume and deal value increased significantly during the first three months of 2017 as 18 technology IPOs raised a total of US$5.8 billion. This was a phenomenal 234% sequential growth and 655% year-on-year growth in total proceeds, along with an 80% increase in the number of listings, sequentially and year on year.
 

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Snap Inc. among the top five tech IPOs in the last seven years  

Snap was the third-largest IPO in the last seven years (2010 through Q1 2017). Four of the top five IPOs were from the Internet Software & Services subsector. Snap is the largest listing since Alibaba in Q3 2014 and also the largest technology IPO in the five consecutive Q1 periods, 2013-2017. Internet Software & Services takes the lion’s share as most billion-dollar IPOs come from this subsector. Speed of reach and easier expansion support the lofty valuations that these companies command.
 

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The Chinese tech IPO market exhibited steady growth in Q1 2017

China, with 12 IPOs this quarter, emerged as a strong contender for technology IPOs, but did not beat its own record of 14 IPOs in Q2 2015. In Q1 2017, Chinese IPOs were the biggest contributor, driving solid growth in the Asia-Pacific region.

What is noticeable is the increasing participation of companies from mainland China, which is expected to grow further because of a backlog of  companies waiting to be listed. The Chinese stock regulator CSRC is facilitating the IPO process for more companies with less intervention from the government. This has encouraged many Chinese companies to go public. 
 

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Two US tech IPOs were unicorns, potentially inspiring other unicorns to follow     

The US reported four tech IPOs with proceeds of US$4.5 billion. The lion’s share of the proceeds was due to Snap, which raised US$3.9 billion. Excluding Snap, the US tech IPO proceeds were US$580 million. Favorable market conditions and over 100 Unicorns in the US is encouraging and suggests more Unicorn IPOs in 2017.
 

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Q1 highlights

With 18 technology companies listing in the first quarter of 2017, total proceeds reached US$5.8 billion, the highest in the last five consecutive quarters. The environment for technology IPOs was positive with two Unicorns—Snap Inc and MuleSoft Inc—listing in Q1 and many more tech Unicorns on the sidelines waiting to enter the market during the year. Snap, with US$3.9 billion proceeds, was the biggest IPO since the US$21.8 billion listing of Alibaba in Q3 2014.

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Q1 2017 didn’t offer much geographic diversity. Only the United States and Asia-Pacific were involved. Asia-Pacific registered US$1.3 billion, representing 23% of the global proceeds and 78% of the global offerings. The US registered US$4.5 billion, which translates into 77% of global proceeds, led by the two Unicorn listings, and 22% of global offerings. Though the European continent witnessed a drought in Q1 2017, the outlook may improve once elections are over and Brexit's impact is better understood.

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The US reported four tech IPOs with proceeds of US$4.5 billion. The lion’s share of the proceeds was due to Snap, which raised US$3.9 billion. Excluding Snap, the IPO proceeds were US$580 million. There is a list of technology companies waiting to float their IPOs. Favorable market conditions and over 100 Unicorns in the US is encouraging and suggests more Unicorns IPOs in 2017.

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Chinese technology companies performed well as China registered 12 technology IPOs with total proceeds of US$1.2 billion. Most of these companies were from China. The Chinese IPO boom was backed by the Chinese authorities in their bid to clear the long list of pending IPOs.

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Japan’s Tokyo stock exchange (TSE) registered two listings with US$126 million proceeds, which reflects a strong outlook on the country’s technology landscape.

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Analysis & opinions

"Overall, the outlook for the world economy is improving in 2017 ...The technology IPO market will likely cash in on this positive sentiment through the remainder of 2017."

Raman Chitkara Global Technology Industry Leader, PwC US

"Geopolitical factors are inhibiting investments in Europe: the heightened political uncertainty due to the aftermath of Brexit and the ongoing elections in countries such as the Netherlands, France, Norway and Germany have brought instability."

Werner Ballhaus Technology, Media and Telecommunications Industry Leader, PwC Germany

“Along with the Consumer Service and Retail sectors, the Tech sector continued to drive a strong Japanese IPO market in Q1 2017. The Tech sector represented a quarter of the total Japanese IPOs in Q1 2017.”

Masaru Koshida IPO Solutions Leader & Venture Support Centre Leader, PwC Japan

"Consistent with our expectations, the number of Chinese Tech IPOs continues to grow as a result of the faster CSRC IPO approval process. Though the deal size of these tech IPOs tends to be relatively small, these companies cover a wide range of subsectors, including Semiconductors and Internet Software & Services. We anticipate the number of Chinese Tech IPOs will reach a historical high in 2017."

Jianbin Gao Technology Industry Leader, PwC China

"After a slow start to the year, the US Technology IPO market accelerated into the close of the first quarter. 2016 Technology IPOs as an asset class richly rewarded investors with returns exceeding the S&P 500. This has continued into 2017 and we expect to see more technology companies and Unicorns enter the US public markets."

Alan Jones Technology Deals Partner, PwC US

*Issue size greater than US$40 million (includes overallotment) and based on trade date

Contact us

Raman Chitkara
Global Technology Leader, PwC US
Tel: +1 (408) 817 3746
Email

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