Twilio shares soar 90% in stock market debut, boding well for other tech IPOs
Communications software maker Twilio Inc. flourished in its stock market debut Thursday, signaling that investors starving for new opportunities may be renewing their interest in risky tech companies.
Twilio shares jumped 90% from the initial offering price of $15, closing at $28.53.
The San Francisco company’s well-received debut could lift the spirits of other expensively priced California start-ups, including file storage service Dropbox and note-taking app Evernote, that produce little or no profits but view an IPO as one way to generate returns for early investors.
Wall Street has valued such companies on statistics such as user growth, betting that money will pour in at some point. But since last summer, a wave of economic turmoil from China to Britain to the U.S. has led increasingly risk-averse investors to reset their expectations for the tech industry.
Twilio’s emergence offers the first strong sign opinions are shifting.
“The valuation disconnect between private market and the public market has chilled IPO activity, but today, IPO investors showed they were willing to pay up for growth,” said Matthew Kennedy, an analyst at Renaissance Capital, which manages exchange-traded funds centered on newly listed companies.
The IPO benefited from several factors. It came on a day that the stock market lifted on suggestions that Britain would remain in the European Union. Demand relative to supply may have been in Twilio’s favor as a limited number of shares were sold, and existing investor T. Rowe Price scooped up many of them.
Though it may have left some money on the table, Twilio still raised $150 million through the offering. Twilio makes software that helps companies communicate with their customers and employees through text messages, phone notifications and in other ways. Ride-hailing app Uber, for example, uses Twilio to notify riders about where their car is.
Analysts also pointed to Twilio’s gaining an edge from pricing its initial shares low, a smart ploy to attract investors who then had a good chance of returning huge returns — as ended up happening. The stock is listed on the New York Stock Exchange under the ticker symbol “TWLO.”
“Twilio isn’t just any new growth buy. It offered IPO investors one of the fastest-growing public software companies, and it came at a discount to its peers,” Kennedy said.
It’s the first tech company valued at more than $1 billion and financed by venture capital to go public this year. Venture capitalists and other investors in recent years have driven up valuations of tech companies in private financings. But concerns that stock-market buyers wouldn’t value the businesses as highly held back IPOs.
UPDATES:
1:43 p.m.: This article was updated with staff reporting throughout after the close of markets.
This article was originally published at 11:09 a.m.
