By Angela Chen
Shares of big data firm Hortonworks Inc. and app-diagnostic tool
New Relic Inc. surged in their public trading debuts Friday, likely
a relief for the bankers and venture-capital firms that previously
invested in the startups at hefty valuations.
Hortonworks, whose initial public offering priced at $16 a
share, opened up 50% at $24 a share. New Relic, meanwhile, priced
at $23 a share and opened 31% higher at $30. In recent trading,
Hortonworks was up 44% and New Relic continued climbing, rising
45%.
Both companies proposed earlier this month to sell shares to the
public at sharp discounts to their valuations, fanning worries
about overly generous valuations across the sector and a larger
tech bubble.
But Hortonworks' offering priced above its estimated range of
$12 to $14 a share, and Friday's share pop puts its valuation at
about $940 million. New Relic, for its part, raised its estimated
price range ahead of the deal and its valuation is now about $1.5
billion.
Palo Alto-based Hortonworks develops Hadoop, a framework that
helps process large data sets and boasts Yahoo Inc. as its top
outside investor, while New Relic's software helps website or app
owners track the performance of their services.
Other companies in the tech space such as Uber Technologies
Inc., software provider Dropbox Inc. and data-mining startup
Palantir Inc. have attracted multibillion price tags in a
relatively short period. Ride-hailing app company Uber, especially,
has been valued at a near-record $41 billion.
But concerns about the sector have mounted when Hortonworks and
New Relic joined the list of at least 30 other companies that have
gone public in the U.S. this year with lower prices than they were
worth in private stock sales or option grants in the prior 90 days,
according to Valuation Advisors LLC, which conducts valuations for
private companies. That compares with 10 such companies last
year.
As a market correction has battered valuations for public
companies in similar sectors as Hortonworks and New Relic, some IPO
prices are now being set in line with those lower valuations. Other
companies, such as Box. Inc., have decided to delay IPOs as market
conditions deteriorate.
The $25 billion IPO of Chinese giant Alibaba Group Holding
appeared to make 2014 a banner year for IPOs. The cumulative $38.9
billion raised is the most since the 2000 dot com boom. Yet when
Alibaba is taken out of the picture, the remaining $13.9 billion is
much closer to the average tech-IPO total of $11.5 billion since
1995.
Part of the concern surrounding Hortonworks and New Relic is
their modest revenue in relation to their valuations.
For the nine months ended Sept. 30, Hortonworks recorded $33.4
million in revenue, which doubled last year's mark but wasn't
enough to outweigh expenses, leading to a near doubling of its loss
to $86.7 million.
Similarly, San Francisco-based New Relic saw a doubling in
revenue this year to $63.2 million, but continued to operate at a
loss.
Friday's pop for Hortonworks and New Relic followed a strong
showing Thursday from Lending Club Corp., which connects borrowers
with lenders online for a fee. It shares surged 56% from the IPO
price, a strong debut for the first publicly traded peer-to-peer
lending company.
Write to Angela Chen at angela.chen@wsj.com
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