As a shift to software-as-a-service continues to drive growth and earnings at unicorn software providers, initial public offerings (IPO) are possible from high-flying companies including Anaplan, Slack Technologies, Cloudflare, Docusign, Smartsheet and Qualtrics. After a lackluster year for tech IPOs in 2017, and with companies deciding to stay private longer, few and far between SaaS public offerings have been carefully tracked by the Street.
However, industry experts have forecasted mergers & acquisitions in the tech industry to pick up big time in 2018 with the passage of the GOP tax overhaul, which slashed the corporate tax rate from 35% to 21% and freed up billions for some of America’s most powerful software companies such as Oracle, Microsoft, VMware and Adobe. If SaaS companies receive better offers from larger competitors, this year could be another slow one for industry IPOs and instead mark a record year for M&A.
On Mar 16, Zuora, an enterprise subscription services provider which helps businesses manage billing and forecasting, filed for its IPO just after freemium web-based cloud storage and collaboration provider Dropbox filed earlier this month. The decision suggests that Zuora, and other SaaS companies, may have viewed Dropbox’s IPO price, which was under previous valuations, as relatively reasonable. Dropbox’s highly-anticipated public debut will mark the largest IPO from a US tech company since Snap Inc. in the first quarter of 2017. The company, which is targeting $612 million at a $7.6 billion market value, also announced that shareholder and partner Salesforce will invest $100 million in a concurrent private placement at the IPO price.
Cloud security vendor Zscaler hit the public markets last week trading on the Nasdaq under the ticker ZS. In just a few days, the stock has skyrocketed from its IPO price of $16 per share to $27.90 as of Monday close.
One promising prospect, DocuSign, suggested in July that it’s aiming to list in “early 2018.” The company has raked in over a half-billion-dollars in funding at a $3 billion valuation, while indicating that it has secured a path to profitability and revenues in “multiples” of $100 million. Workplace collaboration leader Slack could also make a slash on the public markets, given someone like Microsoft or Salesforce doesn’t buy it out first.