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Technology IPOs, and unicorns valued at more than $1 billion pre-IPO in particular, continue to go public before being profitable. Research analysts also continue to estimate that these companies will be profitable farther down the road than in previous years. The balance of future growth versus current profitability seems to be tipping, as investors are buying IPOs that will require them to wait longer than in the past for these companies to achieve profitability.
Since 2016, the number of US-based technology unicorn IPOs has increased significantly, and investor appetite for these IPOs is likely to continue. Yet these unicorns continue to go public with negative numbers: Of the nine unicorn technology IPOs to date in 2019, eight had either negative net income or EBITDA.
The US IPO window is open; 2019 is off to a strong start. The key message for companies contemplating an IPO, and the broader investment community, is while net income and EBITDA continue to be key considerations for investment decisions, investors appear to still believe in growth prospects in an uncertain future.
(1) Tech unicorns are defined as companies with pre-IPO round valuations of over $1 billion.
(2) Includes only IPOs that had analyst estimates 30-days post pricing.