Tech unicorns could hurt IPO market: Kathy Smith
We continue to hear a lot of talk about the increase of unicorns—or startup-companies whose valuation has exceeded $1 billion.
Well, according to Kathleen Smith, Renaissance Capital IPO Exchange Traded Fund (ETF) Manager, there are over 100 of them in the IPO pipeline. and 10% of these have over a $10 billion valuation, including Uber, Pinterest, Square and Airbnb. And with increased private interest and funding, the supply-demand imbalance could affect the IPO market.
Renaissance manages the IPO and IPOS ETFs which act as a proxy for the IPO market.
Smith says the oversupply could affect the health of the IPO market but added that the deals that will get done this year will come from two camps.
The first? Private-equity backed companies (LBOs), which are particularly sensitive to interest rates rising. Examples of companies include First Data, KRR's largest single investment ever-- Neiman Marcus, the luxury department retailer which LBO'd in 2005 for $5.1bn; Albertsons, Cerberus Capital-backed grocer that was carved out of SUPERVALU and then acquired Safeway; McGraw-Hill Education that was taken private by Apollo in 2012; Univision, the leading Hispanic-American media provider; and Petco Holdings.
The second? High quality growth names in consumer and tech that have enough demand to be able to get a good valuation. Names? SoulCycle, the Equinox-backed upscale indoor cycling fitness chain; Pure Storage, a tech name that will test investors' appetite for breakneck growth despite operating losses; the health care sector also remains an increasingly dominant force in the IPO market.
