Watch These Tech IPOs This Week After Snowflake’s Recent Success.
Snowflake Inc. (SNOW Stock Report) has become Silicon Valley’s hottest public company this week. Tech stock enthusiasts will find themselves overwhelmed with a barrage of initial public offerings (IPOs). This is as companies push ahead with their plans to list despite the ongoing coronavirus pandemic. It’s probably one of the busiest weeks in the past few years as 14 companies plan to raise almost $8 billion, just this week.
Snowflake IPO has generated a lot of hype. It’s not just because of huge backers Berkshire Hathaway (BRK.B Stock Report) and Salesforce (CRM Stock Report). Snowflake offers data warehousing solutions to enterprises that can run on cloud platforms, including those of Amazon.com (AMZN Stock Report), Microsoft (MSFT Stock Report), or Google parent Alphabet (GOOGL Stock Report), just to name a few.
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Spillover Effect From Snowflake’s Massive Success Sent JFrog Leapfrogging
JFrog (FROG Stock Report) made a successful debut on the Nasdaq yesterday. It closed the trading session 47% higher than its initial offering price of $44 per share. The company, which has a platform for software release management, saw its share price closed at $64.79 yesterday. The company raised over $500 million in its IPO.
The JFrog IPO is noteworthy because it shows how much investors are willing to pay a premium to get a piece of the company. While the company is also a unicorn, it isn’t nearly as high-profile as Snowflake. However, JFrog has an advantage that many of these other IPOs can’t offer. And it is the fact that the company is on the verge of achieving profitability.
For the six months ended June 30, JFrog reported revenue of $69.3 million, up 50% year-over-year. It boasts roughly 5,800 customers from companies from various sectors. 286 of these customers contribute more than $100,000 per year, while 8 large customers contribute over $1 million. JFrog’s net dollar retention rate was 139% as of June 30.
Is Sumo Logic An Attractive Cloud Play?
Sumo Logic (SUMO Stock Report) priced its IPO at $22 per share on late Wednesday. This will be the third cloud company to go public this week and is also expected to price above the expected range. Sumo Logic is a data analytics and intelligence SaaS company. Its offerings couldn’t come at a better time during a strong tech trend that will power growth. It plays mostly in the observability (DevOps) and security operations space.
Sumo Logic is seen as a close rival to Splunk (SPLK Stock Report). While Sumo Logic is all software-as-a-service (SaaS), Splunk is still making a transition to SaaS. Considering that both are competing in a $50 billion market, according to SUMO’s S1 filings, there is ample room for growth. Let me repeat, Sumo Logic is a SaaS business.
Therefore, it is only a matter of time before the company enjoys high SaaS margins. This partly explains its gross margins, which currently stand at 71%. Judging how well Snowflake and JFrog have performed in their recent IPOs, there’s a great chance for SUMO stock to jump when it makes its public debut this week.
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Unity To Maximize Its Proceeds By Preparing A Unique Debut
With other IPOs pricing above expected ranges, Unity (U Stock Report) increased the value of its own upcoming offering yesterday. The gaming platform company expects its shares to be worth between $44 and $48 apiece, up from the previously estimated range of $34 to $42 per share. That would put the game-engine maker’s valuation at $11.6 billion to $12.6 billion. That’s based on the 263.4 million shares that will be outstanding after the offering.
This week, investors can’t get enough of the hot tech IPOs, making it a rather conducive environment to go public. The highly popular unicorn is currently set to begin trading this Friday. However, unlike the other tech IPOs, we have this week. It is reported that Unity will allocate its stocks differently from the rest. It seems that Unity will have more say over which investors receive shares, according to the Financial Times.
This unique arrangement aims to offer better transparency in what is traditionally an opaque process. And that could perhaps justify a higher IPO price. If that is indeed the case, the potential gain on the first day of trading may be lower than the other tech IPOs. Unity’s IPO looks set to be priced soon.
