The increase in listings post US elections, and strong trading of IPOs in 2016 created good conditions for listing in 2017 and we expect more to come in the second half of the year. It’s not all good news for the sector, as the number of firms trading above their four week listing price has fallen to 58% and investors remain cautious of overpriced stocks.

Snap’s high profile IPO on NYSE in March and Netmarble’s listing in Korea dominate, securing USD 3.9 billion and USD 2.35 billion respectively. In contrast, there were no listings over USD 1 billon in the same period in 2016.

Snap is the third largest technology IPO since 2014, when Alibaba Group raised a massive USD 25 billion. Snap soared 43% in first day of trading but overall has not gained much momentum in the markets, trading mostly below the high of USD 29.44 in its first week of trading and falling close to USD 17 after the first earnings announcement in May. Netmarble’s IPO priced at the upper range, rising as high as 9.2% above the IPO price, aided by their ongoing success of hit games in a highly competitive mobile sector.
Activity centres around three countries with companies from China, US and Korea accounting for close to 60% of all listings by volume in H1 2017. Snap led the Silicon Valley based companies this year, followed by Cloudera, Okta and Mulesoft. Over 80% of all deals were listed in exchanges in Asia Pacific with 33 Chinese companies listing on ShenzChNxt. Listings on domestic markets dominate, but capital raised by cross-border listing is up by 68% with USD 559 million from four deals: X-Fab Silicon Foundries, a Belgium semiconductor company listing on the Euronext Paris; China Rapid Finance, a Chinese FinTech company, listing on the NYSE; Nexion technologies, a Singaporean IT consulting firm listing in the HK GEM for USD 9 million; and Risecomm Group, a Chinese semiconductors company, listed in the Stock Exchange of Hong Kong raising USD 26 million.
US, CHINA AND KOREA DOMINATE CAPITAL RAISING
Netmarble Games Corp accounts for the majority of capital raised on the KRX, at USD 2.35 billion, South Korea’s largest technology IPO over the last six years and for 89% of total capital raised from South Korean companies. The remaining capital came from six IPOs listing on Kosdaq, the Korean equivalent of Nasdaq.
In terms of domestic IPOs in this sector, South Korea has been notably active, with seven deals. Kosdaq, the junior bourse of the KRX is known for its tech-heavy portfolio of companies. 2017 is set to be a record year for Kosdaq as valuations are currently high and cost and complexity of listing is relatively low.
The Shenzhen Stock Exchange has hit record capital levels with USD 1.8 billion from 33 IPOs. Of these, 24 IPOs and USD 1.1 billion coming from the ChiNext board, which is typically aimed at high-growth high-tech start-ups. Chinese technology companies have recovered from the low levels of activity in the first half of 2016, when just 10 IPOs raised USD 453 million.
UK based technology company IPOs, have slowed in recent years, with capital raising dropping dramatically. The first half of 2017 has yet to see issuances over USD 500 million. Alfa Financial Software’s USD 325 million listing on the LSE, is the largest technology capital raising from a UK based company and also the largest listing on the LSE this year. The combined effect of a weak pound and Brexit could be impacting levels of activity.
Fintech capital raising is off to a slow start, with three IPOs raising USD 486 million, down from seven IPOs in the same period in 2016. The largest Fintech company to list this year was that of Alfa Financial Software, raising USD 325 million from their IPO on the LSE. The company listed in May, amid a lot of uncertainty in the UK with Brexit and elections but shares still managed to rise about 30% on the first day of trading. This listing could give hope to those companies waiting on the side-lines to decide the best time to go public in the UK.

Poor trading performance impacted two Fintech IPOs due to list in the first half of 2017 and China Rapid Finance and Elevate Credit both subsequently halved their proposed IPO price and remain below the initial offer ranges set before their respective listings.

A number of IPOs in this industry have pulled or delayed their IPOs from the public markets this year citing Brexit and weak investor demand.
Over the last few years there has been an increasing number of HealthTech companies going public with momentum building from 2013. In 2016, 11 HealthTech companies listed, the largest being ConvaTec, a UK-based global medical products and technology company, which raised USD 1.94 billion on the London Stock Exchange. This listing is the largest European healthcare company to float in London since 1993 and amongst the top ten largest global healthcare IPOs of all time.

The deal flow from this subsector has declined in the first half of 2017, with just one healthtech IPO raising USD 150 million. Medica Group PLC, the largest teleradiology provider by revenue in the UK, saw a strong performance on opening day with share price surge 35% from an IPO price of GBP 1.35 to a high of 183% in the first hour of opening on the London Stock Exchange.
What a difference a year makes In contrast to 2016, a poor year for IPOs in the technology sector, 2017 has got off to a very strong start with 103 companies taking to the markets raising USD 12.1 billion. This is in stark contrast to 2016, when across the year, only USD 10.7 billion in capital was raised from 123 issuances, the majority of activity coming in the second half of the year.
TECHNOLOGY IPOs
Technology-IPOs
PROCEEDS IN USD MILLION
NUMBER OF DEALS
STOCK EXCHANGES
4,717
6
New York Stock Exchange
2,514
7
Korea Exchange (KRX) (inluding KOSDAQ)
1,747
33
Shenzhen Stock Exchange (Including ChiNext amd SME)
New York Stock Exchange
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Korea Exchange (KRX) (inluding KOSDAQ)
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Shenzhen Stock Exchange (Including ChiNext amd SME)
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VALUE (USD MILLION)
% CHANGE
FROM H1 2016
NUMBER OF DEALS
% CHANGE FROM H1 2016
DOMICILE NATION
5,239
456%
9
-
UNITED STATES
2,514
6033%
7
600%
SOUTH KOREA
2,543
462%
44
340
CHINA
520
40%
3
-25%
UNITED KINGDOM
FINTECH - AN EMERGING SEGMENT
HEALTHTECH - A SLOW START
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“The pace of technological change in particular in big data, payments and HealthTech is driving stronger activity. Market platforms as a business model are getting a strong foothold and there is a renewed sense of opportunity in the industry as well as a need to grow to survive and a willingness to invest for the longer term.”
Anne-Marie Allgrove Global Chair, IT/C Industry Group
Over the last number of years there has been a higher demand for software IPOs, in particular for enterprise software companies. Their reliable stream of revenue is proving more attractive than some start-up and consumer software companies. Renewed levels of private funding are enabling companies such as Cloudera to reach very high valuations without going public and now they are reaching out to the market.

A number of enterprise companies, from Okta to Yext to Cloudera, have taken to the public markets in recent months. The IPO of Mulesoft and the acquisition of AppDynamics by Cisco Systems Inc, has encouraged enterprise software companies to test the markets for billion-dollar valuations in the sector.

Mulesoft jumped 47% on their first day of trading and for many enterprise software companies this performance highlighted the IPO market could be open and be a good time to list, especially for companies that are not yet in profit. Cloudera is a US based enterprise data management company and has many tech giants as clients, including Samsung, Siemens, SanDisk and MasterCard.

If these enterprise software firms continue to thrive, early-stage investors providing significant funding could be in for a boost from selling shares in the future. With more enterprise software companies in the pipeline, the segment could be heading for a record breaking year.
The number of venture capital-backed technology companies going public is returning to healthier levels than in the first half of 2016 but is shy of the levels in the first half of 2014 and 2015. The first half of 2017 has already seen a wave of VC-backed tech companies including Okta, Snap and Mulesoft.

Capital raised from VC backed technology IPOs raised USD 6.7 billion, accounting for 55% of capital raised from tech IPOs, with PE backed IPOs accounting for 7% of total capital raised. VC backed technology IPOs are showing signs of recovery after a disappointing first half of 2016, raising just USD 629 million from 14 IPOs.
ENTERPRISE SOFTWARE - PROVIDING MORE CERTAINTY
VENTURE CAPITAL/PRIVATE EQUITY-BACKED IPOs
PE-VC-Backed-Technology-IPOs
PE/VC BACKED TECHNOLOGY IPOs
UNITED STATES
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SOUTH KOREA
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CHINA
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UNITED KINGDOM
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