Categorized | IPO

The Tech IPO Surge

This quarter has been the hottest quarter for tech initial public offerings (IPOs) on the U.S. exchanges since 2007. Between April and June of this year a staggering 89 companies have surged by offering initial public offerings. Many of these companies like Weibo and GoPro, were looking to take advantage of the rise in the stock market as investors have been hungry looking for the next big thing. The Tech IPOs have been surging as venture capitalists continue to pour money, roughly 14 billion dollars annually into tech startups.

Success of the IPOsIPO

The 89 companies that participated in the IPO were able to haul 21.5 billion dollars in the second quarter alone. That shows in comparison of this year versus last year a bump of 41 percent. The benefit of the continued success of the IPOs comes from the easier money policies enacted by the Federal Reserve which have helped both IPOs and the stock market wig improving the U.S. economy. The bulk of the companies all saw the same length of growth, as many of them were able to achieve 20 percent increase of their issue price.

Overall IPOs have been succeeding this year with surprising numbers but it was Tech companies that were the ones who led the way with IPOs in the second quarter. 22 IPOs were able to raise 5.1 billion dollars. This unusual success has dwarfed the money raised during the same time last year which had raised 2.6 billion dollars. The health care sector was only able to raise about 1.8 billion dollars in the second quarter. Last year the health care sector had 17 IPOs, yet this year was able to pave the way with 24 IPOs.

Growth of the Tech IPOs

Growth seen in the IPO market is pegged by market analysts to be attributed to the start ups that have been looking for funding from venture capitalists in Silicon Valley and New York. Mark Cannice is a professor at the university of San Francisco that has stated that “A strong IPO market is the life blood of the venture capital industry as it provides and exit alternative and liquidity for venture investments in early  stage growth companies.”  Growth of the Tech IPOs has taken off more significantly due to the lack of a pending tech bubble. While the stock market may be approaching another market bubble, the tech side is effortlessly flourishing as venture capitalists continue to pour money into countless startups. Many market analysts look on the IPO market with a sense of security because of the way in which the IPO market runs. IPOs tend to function on more of a rational sense of fundamentals, in short if it doesn’t make sense, investors will pull away and the business will ultimately fail.

One of the biggest reasons that the tech IPOs are doing well is because their investors are making money on these types of investments. When profit is being acquired by the initial investors, as we’ve seen more tend to flood the market in order to gain in a sector that is doing rather well. There are tech pockets developing all across the country but the most saturated area is still within California which is holding roughly 64 percent of all the venture funding in the second quarter. Silicon Valley saw more funding and deals being made than the next 15 states combined.IPO 1

Even with a recent IPO dip in venture capitalist investors are continuing to make money. The number of procured venture capitalist sponsored companies rose nearly 7 percent this quarter over the last quarter. It is arguably easier for startup companies to pull in venture money when the stakes are relatively lower. With the bigger companies offering IPOs in order to boost funding for projects or purchases, those numbers need to be much higher. This was seen most recently with the Apple’s 3 billion dollar purchase of Beats Electronics showing off some of the higher prices. Much of the money for this type of investing is coming from hedge funds, mutual funds, as well as private equity firms rather than the more traditional venture investors.

In any case, the current surge of tech IPOs has presented many venture investors the opportunity to invest in small time companies and bigger companies. The amount of investors looking to diversify their investments is providing a new surge of money flowing into the tech world. Because of the lack of funding and market speculation at an all time high, the possibility of a bubble when it comes to tech IPOs is at an all time low. It is because of the high confidence in tech IPOs that has increased the market confidence, investor confidence, and the attention of market analysts to look at the surge of tech IPOs with favor and excitement.


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