The Initial Public Offering of Snap Inc. had the smoothest of openings, which was almost an exception, and this has happened in the industry after a really long time.
There was no drama during the day, during the opening, the pre-opening, or the closing. The shares were priced at $17, and they opened at about $24 and the closing was at about $24.48, making it a smooth ride all the way.
Why was this sudden rise?
- The highness in the markets currently is one of the most important factors in this pop. Although a stock market which is strong is necessary but it’s not just the only factor for the rise in the Initial Public Offering.
- The returns of IPOs have been strong. According to Renaissance Capital, last year, the average initial public offering was up to 26.4%. The IPO ETF of Renaissance Capital, is also up by 28%. This IPO ETF has about 60 of the most recent IPOs.
- There has also been a lack of IPOs of in demand type. In 2016, IPOs had a miserable year with 169 companies going public which was a decline from 2014 which had about 40% more companies. This year also had a terrible start. Therefore the demand is a lot and investors have nothing to buy at the right price. That is why they took what they got.
- This float was really small that is just 14% of the company. Most tech oriented firms use this tactic. They generally seek to keep about 10% or more float to keep the level of scarcity high.
A lot of investors were waiting for the IPO market to open up since last year late June which has been a really long time, but this may be the start they were looking for. Bankers are now being called and the calendars have started to fill up.
It is possible that all this falls apart if the market crashes but here are some interesting opportunities.
Three companies are doing road shows:
- A Canadian high end parka maker, Canada Goose.
- J. Jill, the apparel seller for women.
- An IT product reseller, Presidio.
This is a good sign, but a lot of companies are just sitting out there, maybe more than a hundred, which are likely to make announcements soon enough, such as –
- An enterprise software firm Mulesoft.
- A data analytics platform, Cloudera.
- Chuck E. Cheese one of the largest restaurant and entertainment center chain.
- A peer to peer lending company, Prosper Marketplace
Although there are no big companies like Spotify, Dropbox or Uber, but some substantial companies are there. This is just the tip, if the market stays high and the talks turn out to be right, there could be a lot of IPOs lined up for the year 2017.