Software company Talend SA had a strong debut on the Nasdaq on
Friday in what investors see as a possible boost for the lackluster
tech IPO market so far this year.
Talend priced above the high end of its range Thursday night at
$18, up $1 from the company's estimated range, and raised $95
million. Shares opened Friday at $27.66, up nearly 54% from the IPO
price, and closed at $25.50.
The IPO, only the fifth tech debut of 2016, provided an
encouraging sign as companies have hesitated to risk a poor
performance in the public markets even as private capital has
become harder to raise.
"While relatively few in number, the strong aftermarket
performance of these [recent] offerings is reinforcing the demand,"
said Brett Paschke, head of Equity Capital Markets at investment
banking firm William Blair & Co. "We are seeing many companies
making preparations to launch and expect a more active IPO market
in the coming months."
Talend makes software that combines data from disparate
corporate systems so that companies can use it to make business
decisions. It claims more than 1,300 customers, including General
Electric Corp.
It attributed the decision to go public to a combination of
revenue growth, positive cash flow, and burgeoning demand.
"Part of the reason we were able to take the company public in
an environment like this is a combination of high and accelerating
growth with cash-flow break even," said Chief Executive Mike
Tuchen. "We are sustainably cash-flow positive, and there is an
enormous market [of big data and cloud customers] moving our
way."
The offering shows that the market for tech IPOs may be reviving
after a dormant period.
Line Corp., which makes a mobile messaging app, raised $1.14
billion in July in a dual IPO in New York and Tokyo and was trading
Friday nearly 12% above its IPO price of $32.84.
Twilio Inc., which provides telephony services over the
internet, closed Friday at $40.63, up from an IPO price of $15.
Talend is somewhat unusual, according to Menlo Ventures Managing
Director Matt Murphy, who isn't a Talend investor. It was founded
in France, has several European investors and less than $100
million in revenue, which venture investors have considered the bar
for companies going public.
"If a company like that can get out and do well, it says a lot
about the appetite out there for new issues, which is what everyone
is worried about," Mr. Murphy said.
Still, the IPO market has been missing big names like Uber or
Airbnb, according to Andreessen Horowitz Managing Partner Scott
Kupor.
"We need one of those marquee names to go out," Mr. Kupor said.
"Until then, you'll see a slower drumbeat" of smaller
companies.
Talend has raised more than $100 million from investors
including Balderton Capital, Bpifrance, Idinvest Partners, Iris
Capital and Silver Lake Sumeru.
Although it isn't profitable, both revenue and net losses have
been moving in the right direction. Its revenue last year was $76
million, up from $62.6 million in 2014. Net loss was $22 million,
compared with a $22.5 million loss in 2014.
The market for software that, like Talend's, helps corporate
customers analyze large amounts of data has been uneven, as many
customers have struggled to understand what they want to do with
data and how to do it.
Big data technology is also shifting as more companies move
software from their own premises to the cloud.
A couple of Talend's competitors, Tibco Software Inc. and
Informatica Corp., have gone private to manage this transition,
which requires changing from selling perpetual licenses to cloud
software subscriptions, according to IDC Research Director Stewart
Bond.
While Talend's cloud business is growing, "almost every company
will be hybrid [cloud and on-premises] for at least another
decade," Mr. Tuchen said. "We can solve the problem while they're
doing it."
About half the market doesn't use specialized software to
extract and analyze data, instead doing it by hand, he said. That
leaves lots of opportunity for software companies to automate the
work, he added.
Write to Deborah Gage at Deborah.Gage@dowjones.com
(END) Dow Jones Newswires
July 29, 2016 18:25 ET (22:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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