Number crunching: Tech IPOs

Last week the much-anticipated initial public offering (IPO) of social networking behemoth Facebook inched a little closer, when it won approval from US government regulators to distribute its S-1 public offering prospectus and hit the road.

The offering is expected to raise around $10bn (£6.18bn), valuing Facebook at around $90bn. It is also hoped in tech circles that the blockbuster IPO could inject a much-needed dose of energy into the capital markets arena generally and tech listings specifically.

Certainly, the social media space does not seem to require much in the way of impetus at the moment, with several recent IPOs  – such as Zynga’s and LinkedIn’s offerings last year, which featured US West Coast firms Cooley and Wilson Sonsini Goodrich & Rosati respectively as issuer’s counsel – suggesting that in this area at least there is a Silicon Valley frothiness not far off the overblown days of the dotcom boom.

Elsewhere things are not so buoyant. Certainly data provided by Thomson Reuters suggests that the London market has hardly been inundated with internet and technology IPOs recently.

The largest technology IPO at the London Stock Exchange and on AIM over the past three years was that of Russian internet giant Mail.Ru. The $1bn float saw Russian firm Alrud win a role advising Mail.Ru on the deal with a team led by senior partner Vassily Rudomino and partner Alexander Zharskiy. Cleary Gottlieb Steen & Hamilton took the lead role, with Sullivan & Cromwell advising the banks.

The share price, according to The Moscow Times, could benefit from Facebook’s IPO, not least because the company is among the social networking giant’s investors.

As an indication of the health of the dotcom IPO market, however, Mail.Ru’s deal falls flat. It was one of just two pure internet IPOs listed on any London exchange since 2009 – the second was internet dating operator EasyDate, which also went public in 2010, raising around £10m, this time with the help of McGrigors and Ukraine firm Asters advising EasyDate on Ukrainian law.

With pure dotcom listings so thin on the ground, Thomson Reuters expanded the search criteria to include any high-tech IPOs. This gave a total of eight, the largest of the additional six being Blackburn-headquartered manufacturer of electronic whiteboards Promethean World’s March 2010 IPO, a deal that featured Freshfields Bruckhaus Deringer advising the issuer (with a team headed by corporate partners Neil Radford and Simon Witty, the latter now at Davis Polk & Wardwell) and Linklaters (with a team led by corporate partner John Lane and capital markets partner Pam Shores) advising Goldman Sachs and JPMorgan Cazenove as joint global coordinators, bookrunners and sponsors.

 

The tech take-up

While Mail.Ru raised around $1bn on its IPO and Promethean World $279.7m, the total value of the other six tech public deals in London over the past three years raised just $173.5m – hardly an inspirational stat for any tech company looking to go public.

There are signs, though, of confidence in the UK sector.

“There is a pipeline, particularly among the early-stage companies, although more for rounds of venture funding,” says Dorsey & Whitney partner Matthew Doughty, who advised Canadian bank Canaccord on the IPO of gaming company Zattikka.

All eyes are on the nascent Tech City where currently the sole major law firm is Taylor Wessing.

 

Top five initial public offerings since 2009

  1. Mail.Ru Group, the largest internet company in the Russian-speaking world, raised just over $1bn in November 2010
  2. UK manufacturer of electronic whiteboards Promethean World raised $279.7m in March 2010
  3. Emis Group, the UK’s market-leading primary care software provider, raised $74.1m in March 2010
  4. CSF Group, the Malaysian data centre business, raised $42.3m in March 2010
  5. EasyDate, the internet dating operator, raised $22.2m in June 2010