Proskauer IPO Database
2016: 17 IPOs (26% of 2016)
2015: 20 IPOs (22% of 2015)
2014: 25 IPOs (21% of 2014)
2013: 29 IPOs (29% of 2013)
Total: 91 TMT IPOs
Smaller Deals – Deal size skewed lower in the TMT sector in 2016. In 2016, 12% of TMT IPOs had a base deal size of $250 million or greater, compared to 40% of TMT IPOs in 2015. The average base deal size for TMT IPOs was $196.8 million in 2016, compared to $349.2 million in 2015, $384.5 million (excluding Alibaba) in 2014 and $236.2 million in 2013. This is perhaps related to greater ability of TMT issuers to raise private funding and secondary markets for pre-IPO shares that let TMT issuers defer IPOs in less than ideal markets.
Slightly Improved Pricing – In each of the last three years, TMT IPOs have had a greater percentage of deals pricing above the range (47%, 45% and 44% of TMT IPOs in 2016, 2015 and 2014, respectively, compared to about 24% for all other IPOs from 2014 to 2015 and 8% in 2016).
And a Better Year of Performance – TMT had the strongest aftermarket performance of any sector in our study at each of 1 day, 30 days and 90 days after pricing. Some of the year’s best performing IPOs were in the TMT sector.
…Despite Net Losses and Internal Control Weaknesses – The strong pricing and performance of TMT IPOs occurred despite a higher rate of disclosure regarding potential financial and internal control weaknesses. 76% of TMT issuers reported a net loss as compared to 57% for all other issuers. In addition, TMT issuers with a net loss were more likely to price above the range than the overall market and also performed strongly in the aftermarket. More than half of TMT issuers disclosed a material weakness in internal control over financial reporting without any discernible impact on pricing or aftermarket performance.
Continued SEC Comments’ Emphasis on Revenue Recognition – TMT issuers continue to be far more likely to receive a revenue recognition comment than issuers in any other sector: 76% of TMT issuers received comments in this area, compared to 22% for all other sectors. 13 of 17 TMT issuers were in the software or services subsectors, which have historically been characterized by less-straightforward revenue collection arrangements. Commonly addressed areas included:
- timing of revenue recognition (e.g., over the term of a contract or estimated customer life),
- collection of revenues through third-party intermediaries (e.g., channel partners, direct or indirect advertisers), and
- multiple-element arrangements (e.g., hardware sold together with software licenses and other services).
TMT issuers were also more likely to receive a market positioning or backup support comment than issuers in other sectors.
TMT FPIs Continue Strong Showing – In 2016, FPIs constituted almost a third of TMT IPOs. Some of the more prominent consumer-facing technology issuers that completed IPOs in 2016 weren’t based in Silicon Valley, but overseas. The Japanheadquartered Line Corp. (which was formerly part of a Korean internet search company) was the year’s most notable TMT IPO. Also notable was the December 2016 IPO of Trivago GmbH, a Dutch hotel search platform that was a spin-off from Expedia, Inc.
Multiple Classes – In 2016 and 2015, TMT issuers had a higher instance of multiple classes of common stock compared to each of 2014 and 2013. In 2015 and 2016, 46% of TMT issuers had multiple classes of common stock, compared to 14% for all other issuers. This is a reversal from 2013 and 2014 when 13% of TMT issuers had multiple classes of common stock, compared to 18% for all other issuers.