OCTOBER 18, 2021
All-remote DevOps firm GitLab completed its IPO on Thursday. It closed the week up 49%, giving GitLab a market cap of nearly US$16.5bn. In true remote work fashion, the company was the first-ever Nasdaq listed company to livestream its entire IPO day, with about 18,000 people stopping by over the course of the broadcast.
2021 has seen a mega-surge in listings. In the US alone, over 100 tech companies have IPO’d—the highest figure since the 2000 internet bubble—raising more money than any year since 1995. And that’s before accounting for any direct listings or SPACs.
Australia’s IPO outlook is trending the same way. This quarter alone will see at least seven A$1bn+ floats on the ASX (across all industries) – the biggest quarter since Q4 2013.
On the tech side, listing whispers are abound (all $ in AUD):
This may just be the beginning, too. Venture capital fundraising is at a record high, turbocharging private market value and unicorn proliferation (860 and counting). Most of these unicorns eventually need an exit plan, with IPO and listing presenting a magic trap door.
Magic for investors, perhaps. But being listed isn’t always a silver bullet for everyone – particularly early stage startups.
Firstly, going public is expensive, typically costing $250,000 to $1m+. Then, once you’re public, complying with listed company obligations can be a heavy burden and distraction for small teams. Being subject to constant public scrutiny and disclosure is tough, particularly if revenue growth isn’t heading in the right direction. Plus, your share price is at the mercy of small trades by ‘mum and dad’ investors, who don’t always understand the nuances of high-risk startup investing.
We’ll have to wait and see whether these IPOs will be as successful as GitLab. In the US, share price performance after the first day of trading for IPOs was negative for most of this year, i.e. on average, investors who put money into an IPO after the first day of trading lost money.
If you’re looking to invest, consider whether you’re getting a killer share price in a customer-centric company with solid defensibility in a growing market, or if you’re just buying into yet another company capitalising on the public market bullrush.