As an assistant in the finance industry, I have seen many companies take the IPO plunge. An IPO, or Initial Public Offering, is the first time a company’s stock is offered to the public. It is a significant milestone for any company, marking its transition from a privately owned enterprise to a publicly traded one. In this article, we will take a look back at the top companies that went public in 2016 and analyze their IPO performance, factors that contributed to their success or failure, and their impact on the stock market and economy.
Read also this FintechZoom article: A Look at Companies That Had Their IPO in 2017: Breaking Down the Top Performers.
Introduction to IPOs and their significance
An IPO is a crucial event in the life of a company. It allows the company to raise capital by selling shares to the public, which can be used to fund growth initiatives, pay off debt, or reward early investors. It also provides liquidity to shareholders by allowing them to sell their shares on the public market.
Going public is a significant milestone for any company, as it attracts new investors and enhances the company’s profile. However, the process of going public can be complex and time-consuming, requiring extensive preparation and regulatory approval.
Read also this FintechZoom article: Investor Alert: Why Companies That Had Their IPO in 2014 Are Still Worth Watching.
Overview of IPO market in 2016
2016 was a slow year for IPOs, with only 105 companies going public, down from 170 in 2015. The total amount raised was $18.8 billion, a significant drop from the $30.7 billion raised in 2015. The slow pace of IPOs was attributed to a volatile stock market, uncertainty surrounding the U.S. presidential election, and concerns over the global economy.
Related article in FintechZoom: A Look at Companies That Had Their IPO in 2018: From Spotify to DocuSign.
The top companies that went public in 2016
Despite the slow pace of IPOs in 2016, there were several high-profile companies that went public. The top companies that had their IPO in 2016 are:
1. Twilio
Twilio is a cloud communications platform that enables developers to add messaging, voice, and video to their applications.
The company went public on June 23, 2016, and raised $150 million in its IPO. The stock opened at $23.99 per share and closed at $28.79, up 91% from its IPO price of $15 per share.
This was considered an encouraging sign for the overall market [3].
References:
[1] Twilio soars almost 92% in first day of trading [2] Twilio I.P.O. Raises $150 Million [3] twilio soars 90% in market debut2. Nutanix
Nutanix is a cloud computing software company that provides an enterprise cloud platform.
The company went public on September 30, 2016, and raised $238 million in its IPO. The stock opened at $26.50 per share and closed at $37, up 131% from its IPO price of $16 per share. The CEO and CFO of Nutanix at the time, Dheeraj Pandey and Duston Williams respectively, were both interviewed about the IPO [3].
References:
[1] Nutanix IPO: Announces Pricing of Initial Public Offering … [2] Tech unicorn Nutanix pops more than 130% at public debut [3] Nutanix execs discuss how they built their 2016 IPO …3. Line
Line is a Japanese messaging app that also offers a range of other services, including social networking, gaming, and e-commerce.
The company went public on July 15, 2016, and raised $1.3 billion in its IPO. The stock opened at $42 per share and closed at $41.58, down 14% from its IPO price of $32.84 per share. The IPO was one of the biggest in the US that year [1]. Furthermore, Line’s success was compared to that of Twilio Inc. as both companies had successful IPOs in 2016 despite it being a relatively rough year for the IPO market [2].
References:
[1] Line IPO Is Officially the Biggest American IPO This Year [2] LINE Launches Biggest Tech IPO Of 2016, Shares Soar Nearly … [3] The Top IPOs of 2016Company profiles and their IPO performance
Twilio
Twilio’s IPO was one of the most successful of 2016, with the stock surging over 90% on its first day of trading. The company’s revenue grew from $166.9 million in 2014 to $277.3 million in 2015, and $399 million in 2016. Twilio’s success can be attributed to its innovative platform, which enables developers to add communication features to their applications easily.
Nutanix
Nutanix’s IPO was also highly successful, with the stock surging over 130% on its first day of trading. The company’s revenue grew from $241.4 million in 2014 to $445.4 million in 2015, and $731.5 million in 2016. Nutanix’s success can be attributed to its enterprise cloud platform, which provides a scalable, secure, and easy-to-use solution for businesses.
Line
Line’s IPO, on the other hand, was not as successful, with the stock dropping 14% on its first day of trading. The company’s revenue grew from $656 million in 2014 to $1.1 billion in 2015 and $1.3 billion in 2016. Line’s lackluster performance can be attributed to its limited growth prospects, as the Japanese messaging market is already saturated.
Factors that contributed to their success or failure
Several factors contributed to the success or failure of the companies that went public in 2016. One of the main factors was market conditions, as the IPO market was affected by uncertainty surrounding the global economy and the U.S. presidential election.
Another factor was the company’s financial performance and growth prospects. Companies that had a strong revenue growth trajectory and a clear path to profitability tended to perform better.
Finally, the company’s industry and competition also played a role. Companies that operated in a rapidly growing industry with limited competition tended to perform better than those in crowded or declining industries.
Comparison with previous years’ IPOs
Compared to previous years, the IPO market in 2016 was relatively slow, with fewer companies going public and raising less capital. However, the companies that did go public tended to perform well, with many experiencing significant gains on their first day of trading.
Read also; A Decade of Dreams Come True: Companies That Had Their IPO in 2010!
Impact of IPOs on the stock market and economy
IPOs have a significant impact on the stock market and the economy. When a company goes public, it typically attracts new investors and increases the liquidity of its stock. This can lead to increased demand for the stock, driving up its price and contributing to market gains.
Additionally, IPOs can provide a boost to the economy by creating jobs and stimulating investment. The funds raised from an IPO can be used to fund growth initiatives and research and development, which can lead to new products and services and increased competitiveness in the market.
Lessons learned from the 2016 IPOs
The 2016 IPO market provided several lessons for investors and companies. One of the main takeaways was the importance of innovation and growth prospects. Companies with innovative products and a clear path to profitability tended to perform well, while those in crowded or declining industries struggled.
Another lesson was the importance of market conditions. Companies that went public in a volatile market or during a period of uncertainty tended to perform poorly, while those that went public during a more stable market environment tended to perform better.
Conclusion
In conclusion, the IPO market in 2016 was slow but provided several high-profile success stories. Companies like Twilio and Nutanix went public and experienced significant gains on their first day of trading, while others like Line struggled to gain investor interest. The success or failure of these companies can be attributed to several factors, including market conditions, financial performance, and industry competition. As we look ahead to 2021, the IPO market is expected to remain robust, providing new opportunities for investors and companies alike.
