The IPO market may have slowed in 2016 compared to previous years, but Nasdaq vice chairman Bruce Aust thinks there will still be a few more companies going public on the exchange by the end of the year.
Speaking to Business Insider at Web Summit in Lisbon, Aust said Nasdaq has listed around 120 companies in the US so far this year and that there are still “about 50” active filings. Before 2016, Nasdaq was overseeing around 200 to 250 IPOs each year.
“If you look at the tech IPOs in particular, we’ve had a pretty good performance with Coupa, Nutanix, Blackline — they have all performed fairly well. So I think the window is somewhat open for tech deals. I think you’ll see probably four or five try to get out before the end of the year,” Aust said.
In terms of sectors, Aust said those four or five listings are likely to be within the applications, biotech, data, and cyber security segments, although he didn’t offer names.
We pushed that there is an online travel company rumoured to go public in New York soon — hinting at Business Insider’s previous reporting on Expedia-owned hotel reservation company Trivago talking to banks in preparation for an IPO in November.
Aust responded: “There’s rumours, I hear the same rumours, I think that should happen before the end of the year as well.”
In 2017, Aust predicts the IPO market will be more reflective of previous years.
Referring to the tech sector in particular, Aust said: “2016 was definitely a year of getting back to business, understanding real valuations. But there is a great building of excitement about the newer companies coming out — the shared economy companies that are in the pipeline, that are growing rapidly, and are raising a tremendous amount of money on the private side.”
Nasdaq gets to work with these kinds of startups with the Nasdaq Private Market, helping companies like Docusign and Dropbox with their liquidity programs. We asked what private investors are looking for in these types of companies now — whether it is an audience, revenue, EBITDA, or something else.
Aust said: “They want to see growth and a path to profitability. If you can have one stronger than the other, then that’s fine, but you’ve got to have both.”
Tech valuations began to “rationalize” in 2016, compared to 2015, a time when he thinks the market was “getting too much ahead of ourselves.”
“Companies are really focused on the long-term and growing the company and doing what it takes to grow revenues, but at the same time control the expenses, which is the kind of natural thing you do as you progress.”
What’s different, however, is that the longer private companies stay private, they perform more like public companies, according to Aust.
“In the dotcom era, you didn’t see large groups of investors come in at these times. So that’s going to change the way investors are looking at companies,” Aust said.
Last year, Nasdaq launched a non-profit entrepreneurial studio based in Silicon Valley that provides classes for early-stage companies in areas such as law and media training. The goal in the first year was to have 2,000 entrepreneurs take classes, but the studio ended up taking on more than 3,300 students.
Aust, who is the president of the Nasdaq Entrepreneurial Center, said: “I feel like we really uncovered a need that there was in Silicon Valley. I talk to a lot of CEOs in Silicon Valley and they didn’t have this kind of resource when they were starting companies, so we’re excited about this. It’s only been one year in existence, but we feel like it’s come a really long way.”
The studio is one of many examples of how Nasdaq has diversified its business from just being a stock exchange. It helps with investor relations, corporate governance, 96% of the S&P 500 use Nasdaq for its earnings calls, it launched a machine learning company called Smarts, and it is exploring blockchain applications on the private market.
Aust said: “Most people are surprised when they look at the diversity of our business — we are really a fintech company.”
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