Cloud communications software company Twilio on Thursday found an oasis in the tech IPO wasteland, raising $150 million by pricing 10 million shares one dollar above the top end of its $12-$14 per share range. That means the San Francisco-based “unicorn” was valued higher than it was in its most recent round of private funding ― by 19%, or 4.3% once you factor in the new $150 million. And shares opened trading even stronger, at nearly $24 per share
To be sure, there are a lot of venture capital and growth equity sighs of relief this morning. Not only at the valuation bump, but just the demonstrated fact that there is an accepting public market for high-growth, unprofitable software companies.
But this isn’t to say that everyone is blowing balloons. Over the past 24 hours I’ve heard a lot of concern about Twilio (TWLO) choosing to price right into the Brexit vote, thus making its aftermarket performance particularly prone to macro risk. In short: Why today of all days?
A few thoughts on that:
1. The markets are up sharply in early trading this morning, apparently reflecting a belief that Brexit will go the way of Y2K. Indeed, a source close to Twilio tells me that the company and its bankers do not believe the vote will be terribly close.
2. Part of the move seems to be typical aggressiveness by lead banker Goldman Sachs (GS), which recently earned grumbles from other investment bankers for top-ticking the Cotiviti (COTV) IPO (thus, arguably, depressing aftermarket performance and making investors less interested in IPOs).
3. Here was a delightfully cynical view one private equity investor who isn’t in the company: “This is a win-win for Twilio. If Brexit fails, then it gets to ride a massive market wave. If Brexit succeeds, then Twilio manages to go public before the markets collapse and the IPO window slams shut. Plus, no one will blame Twilio for the lousy stock performance. This may be the best day to go public, not the worst. I’d bet they intentionally planned it this way.”
4. It also is worth noting that we won’t actually know the Brexit results until well after U.S. markets close today. The first results are supposed to come in after midnight local time (7pm ET), so the real trading impacts will be felt first in Asia.
Twilio had raised around $240 million in VC funding, from firms like Bessemer Venture Partners (28.5% pre-IPO stake), Union Square Ventures (13.6%), and Fidelity (6.1%). It reports around a $6.5 million net loss on $59 million in revenue for the first quarter of 2016, compared to an $8.7 million net loss on $33 million in revenue for the year-earlier period.