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Global Technology IPO Review – Q1 2017 Summary

Core Content

The Q1 2017 global technology IPO market showed a strong rebound after a difficult 2016, with 18 technology companies raising a total of $5.8 billion, the highest in the last five quarters. This marks a 234% sequential increase and a 655% year-on-year increase in total proceeds, alongside an 80% rise in the number of listings. The Internet Software & Services subsector was the largest contributor, followed by Semiconductors and Communications Equipment, with significant growth driven by Chinese companies.

Main Points

• Snap Inc and MuleSoft Inc were the two Unicorns that listed in Q1 2017, with Snap raising $3.9 billion, making it the largest IPO since Alibaba in 2014.
• China had a resurgence in tech IPOs, with 12 listings raising $1.2 billion, which is 67% of the total number of IPOs and 23% of the global proceeds. This reflects a favorable domestic market and faster IPO approvals by the CSRC.
• The US had 4 tech IPOs, raising $4.5 billion, with Snap and MuleSoft being the key contributors. The US market showed strong investor confidence, aided by a lack of late-stage private funding.
• Japan had 2 tech IPOs, contributing to the overall growth of the Asia-Pacific region, which accounted for 78% of the global offerings.
• Europe and the UK saw limited activity due to Brexit uncertainty and political instability from upcoming elections. However, a pipeline of tech IPOs is expected to drive growth in the latter half of 2017.

Key Financials

• Average LTM revenue for all 18 tech IPOs was $356 million.
• Only 4 companies reported losses, with Snap having the largest loss of $515 million.
• 78% of companies reported net income, a significant improvement from the previous quarter.
• Internet Software & Services had the highest average LTM revenue ($204 million) and enterprise value ($5.7 billion), with a 27.9x EV/LTM revenue multiple.
• Communications Equipment had $426 million in total proceeds, with 4 listings, and an 19x EV/LTM revenue multiple.
• Semiconductors had $345 million in total proceeds, with 3 listings, and an 8.9x EV/LTM revenue multiple.

Geographical Distribution

• Asia-Pacific (China and Japan) accounted for 91% of all tech IPOs in Q1 2017.
• China was the largest market, contributing 12 IPOs and $1.2 billion in proceeds.
• The US accounted for $4.5 billion in proceeds, representing 77% of the global total.
• Europe and UK had zero tech IPOs, due to political uncertainty.

Subsector Distribution

• Internet Software & Services was the leading subsector, with 5 IPOs and $4.4 billion in proceeds.
• Semiconductors and Communications Equipment also saw strong growth, particularly from Chinese firms.
• IT Consulting & Services and Electronics had 2 IPOs each, with IT Consulting & Services showing the highest average revenue ($1.4 billion).

Methodology

• The analysis is based on issue size greater than $40 million (includes allotment) and is derived from S&P Capital IQ data.
• The report includes valuation metrics such as EV/LTM revenue and EBITDA.

Outlook

• The global tech IPO market is expected to benefit from the improving economic outlook in 2017.
• Europe may see a resurgence in tech IPO activity after the elections and as Brexit uncertainty eases.
• China is expected to continue its growth trajectory, with a historical high in tech IPOs anticipated for 2017.
• Political and economic factors such as US protectionism and rising interest rates may pose headwinds to the market.

Summary of Key Figures

Key Quotes

"Overall, the outlook for the world economy is improving in 2017... the technology IPO market will likely cash in on this positive sentiment through the remainder of 2017."
Raman Chitkara, Global Technology Industry Leader, PwC

"Consistent with our expectation, the number of China tech IPOs continues to grow as a result of the faster CSRC IPO approval process."
Jianbin Gao, Technology Industry Leader, PwC China

"Geopolitical factors are inhibiting investments in Europe: the heightened political uncertainty due to the aftermath of Brexit and the ongoing elections in countries such as the Netherlands, France, Norway and Germany have brought instability."
Werner Ballhaus, Technology, Media and Telecommunications Industry Leader, PwC Germany