Yesterday, Sichenzia Ross Friedman Ference LLP Partner Gregory Sichenzia was featured in Law360’s article to provide his thoughts on the launch of Pure Storage data flash storage supplier’s IPO this week. Pure Storage opened their trading at a lower offering price than was originally anticipated and Law360 asked Sichenzia on whether or not this would spell trouble for the company’s future as a public entity:
Sichenzia Ross Friedman Ference LLP partner Gregory Sichenzia said a first-day bounce would have helped, but he said Pure Storage probably isn’t an ideal bellwether, noting that its business model of providing data storage for companies is less exciting than the kind of “sexy” story needed to revitalize interest in technology IPOs.
“Maybe it is going to take another Facebook or Twitter to capture the public attention,” Sichenzia said. “I don’t think Pure Storage is that company.”
Read the full article here or read it below:
______________________________________________________________________
Pure Storage’s Bumpy Debut Could Dampen Tech IPO Hopes
By Tom Zanki
Law360, New York (October 7, 2015, 8:51 PM ET) — Pure Storage Inc.’s initial public offering — a closely watched IPO marking the first technology issue in three months — was greeted coolly Wednesday, and capital markets attorneys say the lukewarm reception could chill hopes for a revival of technology offerings, especially while private financing options remain attractive.
The flash memory storage provider’s foray into public markets, which valued the company at $3.1 billion, was among the most notable IPOs in months, raising $425 million in the largest venture capital-backed technology issue in 2015, according to IPO researcher Renaissance Capital.
Given the weak output of technology IPOs in 2015, capital markets observers focused on how the startup would fare, sensing that a first-day pop could revive confidence for the sector and IPO deals in general. But Pure Storage failed to excite, opening trading on the New York Stock Exchange at $16.74 and closing at $16.01, or 5.8 percent below its initial price of $17.
Wilson Sonsini Goodrich & Rosati partner Tony Jeffries said Pure Storage’s showing probably won’t affect plans of other so-called “unicorns” — a term for private companies valued at more than $1 billion — but smaller companies more sensitive to market volatility might step back.
“I think it matters more for smaller companies than others,” Jeffries said, adding that companies with robust revenue have more freedom to time public entries on their terms. “Pure Storage is by all accounts a growing company. Ordinarily, it would be a very exciting IPO. If it doesn’t trade up on its first day, a lot of companies could look at that and say, ‘We won’t go.’”
Sichenzia Ross Friedman Ference LLP partner Gregory Sichenzia said a first-day bounce would have helped, but he said Pure Storage probably isn’t an ideal bellwether, noting that its business model of providing data storage for companies is less exciting than the kind of “sexy” story needed to revitalize interest in technology IPOs.
“Maybe it is going to take another Facebook or Twitter to capture the public attention,” Sichenzia said. “I don’t think Pure Storage is that company.”
The Pure Storage IPO came as deals lawyers are seeing fewer technology IPOs price. The sector has generated about 11 percent of all IPOs year to date, according to Renaissance Capital, a trend experts attribute to volatile markets, along with attractive private financing options and regulatory changes that ease the pressure of going public.
“The combination of a poor macro environment and companies being in a position of not having to go public is what we’re seeing,” Jeffries said.
Ample private funding is a big reason companies are less quick to go public. Ride-hailing startup Uber Technologies Inc. and home and apartment-rental company Airbnb Inc. grabbed headlines this year with private funding rounds in excess of more than $1 billion.
Regulatory changes also play a role in the reduced offerings, said Latham & Watkins LLP partner Patrick Pohlen. The Jumpstart Our Business Startups Act of 2012 — or JOBS Act — lifted the cap on private “holders of record” from 500 to 2,000 before most companies are forced to file detailed quarterly and annual reports with the U.S.Securities and Exchange Commission, similar to a full-fledged public company.
In addition to clarifying the definition of “holder,” Pohlen said the JOBS Act’s raised threshold on private holders provides emerging companies breathing room before the costly requirements of public ownership kick in. That and the availability of healthy private markets are allowing companies more control over timing their public entries.
“Many of these companies are able to do just fine raising capital privately to fund their businesses,” Pohlen said.
The Pure Storage IPO, guided by Cooley LLP, was the first technology offering since venture capital-backed cybersecurity company Rapid7 Inc. went public in July with a$103.1 million offering, and it marked the second unicorn to go public, following Box Inc.’s $175 million IPO in January.
Despite the relative dearth of new technology IPOs, capital markets lawyers say the potential pipeline remains strong with more quality companies that can begin roadshows upon signs of more favorable markets.
“Someone just needs to be a first mover,” Pohlen said.
Stocks in general have been volatile since August partly because of overseas volatility in China and emerging markets and questions about the durability of the U.S. economic recovery. The broader IPO market posted 43 percent fewer issues in third-quarter issues compared with the same period last year, according to Renaissance Capital.
The uncertainty continued Wednesday as Caribbean telecommunications provider Digicel Group pulled a potential $2 billion offering that was being advised by Davis Polk & Wardwell LLP, citing market turbulence.
Looking at technology in particular, Sichenzia said the sector has been overshadowed by a hot biotech industry that, until August, was producing outsize returns and attracting more attention from institutional investors.
“We just didn’t see that kind of pop in the tech sector,” Sichenzia said, adding that the recent correction in biotech returns could “open the door for software and tech companies to steal some of that limelight.”
Another major technology-related IPO is set to price next week, though it’s not a new company. Private equity-owned First Data Corp., guided by Simpson Thacher & Bartlett LLP, plans to raise up to $3.2 billion in what would be this year’s largest debut of a leveraged buyout, coming eight years after KKR & Co. took the payments processor private.
–Editing by Christine Chun and Philip Shea.
All Content © 2003-2015, Portfolio Media, Inc.
[starbox id=10]
[starbox id=1]
