Global tech IPOs – are they a good investment? Our Co-founder Kevin Hua explores the current global IPO landscape, which ones you should look out for, and why they’re enticing to investors. 

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In this 4-min interview with Chris Hall of Arrow Securities, we reveal why Dropbox, Spotify and Farfetch are attractive from an investor standpoint.

Click below to listen to the interview (listening time is 4:20 minutes).

 

Read the full interview below (reading time is 3:09 minutes).

Chris: What’s your view on these global IPOs?

Kevin: Well, I think we’re at the stage where market is certainly still open for technology IPOs in particular. Over the course of the next month to three months, we’re going to see some very interesting things happen.

As we speak, Dropbox just listed last week and it’s risen over 40% since its listing. There were very much concern about this company in terms of the high valuation that it had reached in private markets, and was asking for at the IPO. But that really hasn’t deterred investors post-IPO.

Now, I think the reason for that is it’s a cash flow-positive business – it’s almost break-even. Dropbox has demonstrated 30% revenue growth to date, and it has a large ecosystem of 500 million users worldwide for its cloud services.

So, I think from that perspective, that’s why investors have been so positive.

Chris: So, straightaway, we can rule out that it’s like the tech wreck of 2001 because it’s profitable, or almost profitable. Are there any recent ,or in the last 5-10 years, large global tech IPOs you can think of to parallel with Dropbox right now?

Kevin: There are. I mean, obviously, there are other cloud service providers out there such as Box.com, which is another listed cloud service provider ­– mainly serving retail and SME clients, as well as some enterprise clients. So, there are good examples in this industry.

Clearly, we’ve got big cloud providers as well such as Microsoft, Google, and Amazon Web Services as well, which have slightly different business models as you can imagine.

Chris: You mentioned that there were some more IPOs coming in the next couple of months. Which ones are taking your gaze?

Kevin: There are two in particular that we’re focused on. The first one is Spotify, which is the music streaming business. And that’s an interesting IPO because they’re bucking the trend.

They’re not raising any capital. Therefore, they’re not using any underwriters; Spotify is effectively finding a price that’s suitable for investors to list on the market. So, we should be seeing that coming in the market in the next couple of weeks in early April.

And for the listeners out there who don’t know too much about Spotify, even though they may be users:

  • It has developed a large ecosystem of 159 monthly active users
  • 71 million are paid users, double that of Apple Music.

So, it’s got really a first mover advantage, I guess. Even though competition is increasing quite rapidly in the space with the likes of Apple, Amazon, and Google as well through the YouTube service.

Chris: Are there any other ones that you’d look at to round out the next couple of months?

Kevin: One that we find interesting in particular for our online shopping fund is a company called Farfetch, which is a luxury online retailer. It has demonstrated amazing growth since it launched.

It is seeking about $6 billion valuation, which is similar to what its closest competitor, YOOX Net-a-Porter, is valued at by the market.

But that could be a very interesting IPO in terms of the growth prospects it’s seeking. Also, the fact that it’s in an industry that very few people have managed to do well apart from Farfetch and YOOX.

So, it’s potentially a very lucrative investment for investors.

 

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The Rapid Marriage of Off-line and On-line Shopping from Amazon

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AtlasTrend manages global share funds investing in companies driving or benefiting from global themes such as big data and online shopping

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About Kevin Hua

Kevin Hua is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kevin has over 20 years experience in financial markets including as Senior Portfolio Manager at Atrium Investment Management and Stark Investments.