More than 50 tech startups look set to go IPO this year, Bank of America's top tech banker says
- The market for tech public offerings bounced back last year after a poor showing in 2016.
- This year and next should be even better, predicts Neil Kell, the head of Bank of America Merrill Lynch's tech banking practice.
- Not only are there lots of companies waiting to go public, the markets have been strong, and investors are primed for new tech offerings, Kell said.
Last year, the market for initial public offerings among tech startups bounced back from a weak 2016.
But this year could be even better.
That's the word from Neil Kell, head of the tech, media, and telecom equity capital markets business at Bank of America Merrill Lynch. His forecast: The number of tech IPOs will jump from about 38 last year to more than 50 in 2018. And next year could be just as good.
"Looking at the pipeline, I don't think I've seen it this healthy in technology in a long time," Kell said.
The types of startups going public are likely to represent a wide range of technology sectors, from traditional internet services to mobility to cybersecurity to enterprise software as a service, he said. Among the companies that has already filed the paperwork for a public offering is cloud storage company Dropbox.
Additionally, some new types of technology companies could also hit the markets, such as those tapping into artificial intelligence or building AI-related applications, he said.
"We're certainly having more and more dialog with AI-oriented companies," he said.
Numerous factors point to a strong IPO market this year
Several factors are driving the expected upsurge in offerings, Kell said. Perhaps most notably, many technology startups - including dozens of so-called unicorns that have valuations north of $1 billion - have been privately funded by venture capital firms for years through many rounds, and those firms are looking to finally cash in on their investments, he said. With the market on a long bull-run and the economy undergoing its second longest expansion since World War II, those firms may also want to have their startups go public before the good times come to an end.
Part of the thinking is, "We're in a good market. Strike while the iron is hot," Kell said.
But much of his optimism about the tech IPO market is due to the fact that the economy remains strong and investors have been generally bullish, despite the recent volatility in the stock markets. At the same time, many portfolio managers have more cash than typical in their holdings and need a way to invest that; tech stocks, which frequently promise fast-paced growth opportunities, offer an attractive option, Kell said.
And the recent volatility might actually be beneficial for tech companies thinking about going public, he said. When stocks are largely trading sideways, public offerings can offer some of the only promising avenues for growth, he said.
"Their investment decisions become more challenging in volatile markets," he said. "Good growth opportunities can become even more attractive in this environment."
Last year, 38 tech companies went public, raising $10 billion combined, according to data from Renaissance Capital. That followed two down years, in which fewer than 30 tech startups went public each year. Over that two-year period, those IPOs raised just $10.8 billion combined.