This week is a rather exciting week for IPO's as communications tech company Twilio (TWLO ) is coming to market. The exciting part will be to see how investors respond to the offering as there are many tech companies out there that are eyeing an IPO. A positive response could open the door for others to hop in the water. On the other hand, if investors shy away from Twilio it will send a clear message to the tech space which has recently been accused of sky-high valuations. Twilio will certainly show how IPO investors value unprofitable software providers with explosive growth.
Twillio is the first Silicon Valley company to go public since Square (SQ ) in November and Pure Storage (PSTG ) in October. The company represents a true growth story in app development. Analysts comment that its IPO is one step in the process of marking down private market valuations meeting the realities of the public market. This one name could really serve as a turning point for 2016 tech IPO activity.
About Twilio:
The company provides the #1 platform for adding voice, messaging and video to mobile apps. Its customers include Uber, WhatsApp, Zendesk, Coca-Cola and thousands of app developers. According to filings, sales grew 78% in the first quarter, faster than nearly all of their competitors. While it has a lower gross margin than peers and expects to remain unprofitable, Twilio was cash flow positive in the first quarter. A key risk is that it demonstrate the unique value of its platform as more competitors enter the fast-growing space. The deal appears structured to work well initially, with a relatively small float, insider buying and a valuation discount to peers.
Other offerings this week include:
Tactile Systems Technology (TCMD ), which markets pneumatic compression devices for lymphadema. The company plans to raise $60 million. Unlike the year's other four medical device IPOs, Tactile can boast meaningful sales, growth and profitability. Analysts comment that it must continue to grow sales of its core Flexitouch system while keeping marketing spend in check as it navigates expiring patents and a negative reimbursement ruling from Medicare. Expect to see 4 million shares at a range of $14-16.
Selecta Biosciences (SELB ) aims to raise $64 million by offering 4.25 million shares at a range of $14-16. The money will be used to further develop its biodegradable nanoparticles, which it is currently developing as an adjunct therapy for gout. The company posted positive Phase 1b results, but has a large accumulated deficit and only one clinical candidate. The company is backed by Polaris Partners, Flagship Ventures and OrbiMed, and insiders are investing $40 million on the IPO.
Gemphire Therapeutics (GEMP ) plans a $45 million IPO at a market cap of $125 million. Led by the former CEO of ProNAi Therapeutics (DNAI ), which is down 88% from its IPO price, Gemphire is developing a drug first discovered in 1998, which it believes can be an effective treatment with statins for high cholesterol. Insiders are investing $10 million on the IPO. Expect to see 3.75 million shares at a range of $11-13.
