An Initial Public Offering (IPO) is the first instance of a privately-owned company offering its stock for purchase to the public. The process, which involves listing the company’s shares on one or more stock exchanges, is undertaken either by small companies looking to raise capital or by large corporations who wish to be publicly traded.
In the world of tech, IPOs are mostly launched only by companies when they are large enough to warrant one because, since the early dot-com days of the 90s, startups have been funded by Venture Capitalists and individual investors. As the world has evolved into a tech-based society, these companies have recorded larger and larger IPOs over the years. Having witnessed the rapid rise of the likes of Google, investors in recent years have spent billions searching for the next-big-one. Companies in the space of e-commerce, social media, data analytics, and more are all represented in the largest-ever IPOs by tech companies so far:
The Alibaba Group was a relatively unknown company outside its native country of China when it went public in September 2014. But the technology conglomerate quickly became a household name when its IPO raked in $25 billion, making it the largest-ever IPO for any company in history. On its first day of trading on the New York Stock Exchange (NYSE), Alibaba’s stock witnessed a 38 percent increase, establishing a market cap of around $238 billion.
Alibaba did have a rocky first couple of years as a public company but its stock performance has been exemplary in the last year. With its share price more than doubling in 2017, Alibaba became the first Asian company to reach the $400 billion market cap mark in August. In January this year, it became the second Asian firm (after Tencent) to record a market cap of $500 billion, albeit briefly. The Alibaba Group currently has a market cap of around $494 billion – more than double of what it was at its historic IPO.
Facebook’s IPO is one that garnered a lot of attention. In the weeks prior to its debut on Nasdaq, there was a lot of excitement and speculation about the news of the social media giant’s public debut. On a fateful day in May 2012, however, the excitement quickly turned to anger. Technical glitches, followed by allegations in the coming days that Facebook withheld key financial information from the average shareholder, led to the filing of several lawsuits against the Californian tech company. But it’s a testament to Facebook’s allure as a Silicon Valley powerhouse that its IPO raised $16 billion at a market cap of over $104 billion despite this.
While Facebook had a tumultuous first year as a public company – a drop below its IPO price of $38 a share on the second day of trading took over a year to right itself – it has been on a strong upward trajectory ever since. Backed by its strong growth on the mobile platform (helped no doubt by the company’s acquisitions of WhatsApp and Instagram) and ever-increasing revenues from advertising, Facebook is today among the world’s most valuable companies, with a market cap of over $530 billion.
Snap Inc., the parent company of ephemeral photo-messaging app Snapchat, held its highly-anticipated IPO on March 2, 2017. While announcing his company’s imminent market debut, Snapchat CEO Evan Spiegel made it clear that the social media platform was not a profit-making enterprise and that high revenues in the future could not be guaranteed. Despite this, Snap had a promising first day of trading on the NYSE with its shares rising 44 percent, netting $3.4 billion and giving the company a $28.3 billion market cap at the close of day.
But all the early investors who hoped that Snapchat would go the way of other successful Silicon Valley startups like Google and Facebook were in for a jarring disappointment. Barely two months after it became a public company, Snap published its first quarter results for the year – a $2.2 billion loss, a sharp reduction in user growth, and lower-than-expected revenues. This sent the price of Snap shares plummeting from $23 to the pre-IPO mark of $17.
Now, nearly a year since its IPO, Snapchat remains in a precarious position. Its recent update was met by a fierce backlash and a negative tweet about it by Kylie Jenner wiped $1.3 billion from Snap’s market value, reversing the boost granted by the company’s better-than-expected earnings release this year. With a current market cap of $20.6 billion and a cutthroat race for competition in a market dominated by rival Facebook’s Instagram, Snapchat’s fortunes seem to be on the verge of disappearing much like its messages.
The microblogging site Twitter held its IPO on November 7, 2013, with its shares being floated on the NYSE. Its stock price saw a 73 percent increase (from $26 to $44.9) on that day and the company’s proceeds from the IPO amounted to $2.09 billion, with a $31 billion market cap. This made it, at the time, the second-largest IPO ever for an American tech company (ahead of Google and behind Facebook). The Jack Dorsey-led company bore promise in the coming months and its share price touched the $74 mark in December 2013, but that was the highest it would reach. A business model in which profits are hard to come by, and a reputation as a ‘haven for trolls’ that dissuaded potential buyers, has left Twitter in deep water. Its share price is currently around $32 and its market cap around $24 billion – not very different from the time of its IPO, which was over four years ago.
JD.com showcased the rise of Chinese e-commerce companies when it made a positive market debut on Nasdaq in May 2014. On its first day of trading as a public company, the Alibaba rival raised $1.8 billion at a market cap of $28.6 billion. A sizeable number of shares were also sold to Tencent, another Chinese conglomerate with whom JD.com had forged a strong partnership.
JD.com is China’s second-largest online retailer (after Alibaba) and is one of the world’s leading companies in autonomous logistics (it uses drones and driverless trucks for deliveries). The company has been busy expanding since it went public, acquiring Wal-Mart’s Chinese arm Yihaodian and investing in countries like Russia, Vietnam, France, and the UK. It has also spun off JD Logistics and JD Finance, two well-funded subsidiaries that continue to add to their parent company’s growing fortunes. JD.com today has a market cap of over $68 billion – a healthy growth of over 140 percent from its IPO days.
Google listed its IPO in August 2004, five years after its founders Sergey Brin and Larry Page nearly sold the company to Excite for less than a million dollars. The IPO, conducted through the unusual method of online auction, raised around $1.9 billion with a $23 billion valuation, an astronomical amount for what was then a six-year-old company. But many felt that the internet giant, which was already generating an annual profit of $286 million at the time, could have raised far more had it stuck to the conventional method of going public. All that didn’t matter though, because Google soon became synonymous with internet search and online advertising, and its bottom line went nowhere but up. Today Google, or rather its parent company Alphabet, is one of the world’s most innovative and valuable firms, with a market cap of over $793 billion.
VMWare, a California-based data and analytics company, was acquired by EMC Corporation in 2004 for around $625 million. Three years later, EMC then sold 15 percent of its stake in VMWare to the public via an IPO that raised $1 billion. Then in 2016, Dell Technologies Inc. acquired EMC in a $67 billion deal that made VMWare a publicly-traded subsidiary of Dell. VMWare’s performance has seen steady growth over the years and the company currently has a market cap of around $50 billion. Dell recently announced that to offset the debt acquired through its EMC acquisition, it is considering either an IPO or a merger with VMWare.
Renren generated a lot of excitement when it went public in May 2011. The social media company, which was often referred to as China’s Facebook, raised $740 million in its IPO which saw its stock rise over 40 percent in early trading. But in the next few years, as internet users transitioned from computers to mobile devices and caused a subsequent drop in advertising revenue for the social media company, Renren’s stock performed woefully in the market. A 56 percent drop in share price in 2016 led Renren to divide its shares in a one-for-five stock split. But the company today has a market cap of just $650 million, a fraction of the $16.5 billion at the time of its IPO.
Hyperlocal marketplace Groupon and mobile messaging platform LINE Corp complete the list of top-ten tech IPOs, having raised $700 million (at a value of $12.7 billion) and $1.1 billion (at a value of $9 billion) respectively. While Japan-based LINE is currently slightly better off with a market cap of $9.8 billion, the American Groupon is at a meagre $2.48 billion.
Do you own stock in any of these companies? What are your most memorable IPO moments in tech? Let us know in the comments!