The DoorDash and Airbnb pops were particularly notable because the companies used a hybrid auction model for their IPOs. Lyft rose a bit on its first day and then dropped, while Uber sank immediately. Facebook was basically flat in its debut before trading lower in the ensuing weeks. Prior offerings in the top 10 milked every penny they could out of their IPOs. "Other than the dot-com era (1999-2000), I've never seen anything like this across so many companies," wrote David Golden, a partner at Revolution Ventures in San Francisco who previously ran tech investment banking at JPMorgan, in an email. "And the valuations are seemingly untethered from any analytic metrics that I've understood." In other words, even though they raised more money in their IPOs than just about any other tech company before them, their performance suggests they could've raised a whole lot more cash with no additional dilution. DoorDash and Airbnb certainly didn't help matters, jumping 85% and 112%, respectively, out of the gate.
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It was the type of first-day pop that irks IPO skeptics, who complain that tech companies leave too much money on the table, offering a free handout to new institutional investors. The offering valued Snowflake at $33 billion, a number that more than doubled when the company started trading.
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Snowflake raised $3.9 billion in September, the largest software IPO ever. Snowflake is different: It sells cloud software and relies on a more traditional enterprise salesforce. With all that cash burning, only Airbnb recorded a net profit in the latest quarter, and that was after cutting sales and marketing costs and slashing its employee base by 25% because of the pandemic. They connect businesses with consumers through technology and logistics and take a cut of every transaction.Īll four companies relied on vast amounts of outside capital to grow their networks, promote their services, rapidly expand into new markets, hire aggressively and offer incentives to both sides of the marketplace.
That's "allowed companies like Snowflake, DoorDash and Airbnb to raise private capital on attractive terms, and they've been in no rush to go public as a result."įour of the five mega offerings between 20 - Uber, Lyft, DoorDash and Airbnb - are leaders in the sharing economy, meaning their models are based on peer-to-peer marketplaces.
"With the ample supply of VC money and other sources of private capital from sovereign wealth funds and mutual funds buying pre-IPOs it's pushed up the private market valuations," said Jay Ritter, a professor of finance at University of Florida and an expert on IPOs. A healthy roster of emerging software companies, including cloud software names like UiPath and Databricks, could still fill up the pipeline in 2021. The high-valued tech companies are taking advantage of a bull market that's continued despite nine months of the coronavirus pandemic and a disastrous year for the broader economy. Before going public they commanded valuations in the double-digit billions, attracting large checks along the way from private equity firms, fund managers, strategic investors and sovereign wealth funds. They each raised over $3 billion and have market caps between $55 billion and $100 billion, putting them among the 30 most valuable U.S.
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