IPO Pending? Top Private Placements in Tech Companies

With the economy seemingly headed towards recovery and unemployment stabilizing, it appears that the crisis of 2008 may finally be just a memory. At the very least, it seems that the capital markets are in good shape. IPOs are on the rise again, and market indices were recently hitting record highs.

In a previous post, we noted that Private Placements are also on the rise, a further sign that the liquidity crunch of the great recession is truly over. As we showed in that post, the number of private offerings increased by 34% from 2009 to 2012, and that trend looked set to continue into 2013.

Private placements are the sale of securities to a limited number of relatively sophisticated investors — usually funds, and often individual accredited investors — and not to the general public. By virtue of being private (and through other limitations), these placements are exempt from certain regulations.

Why would a business be interested in executing a private offering? A private company might not have access to the public markets, or it might not want to deal with the filing requirements associated with a public offering. A public company, on the other hand, might want to appeal to a specific type of investor, or offer boutique products more sophisticated than the general investing public would generally be interested in.

With Twitter in the news for its anticipated IPO, and other big names such as Groupon and Facebook making lots of noise in the markets lately, it’s clear that tech companies are still big draws for IPOs. Even casual investors get excited about these offerings.

With these trends in mind, Audit Analytics took a look at 2013 private placements in non-public tech companies.1 Since large private placements are sometimes seen as one of the final steps in preparation for an IPO, we thought it would be interesting to see what private technology companies are raising substantial funds. Perhaps there’s a relatively unknown company getting ready to make a big move. The following table shows the ten largest private placements in 2013 of non-public technology companies.2

Private Placement Blog OCt 2010

A few things jump out. LivingSocial was, until recently, considered a strong IPO candidate. Far from sending a strong signal to the market, however, this $110 million placement did much to cool anticipation, since it implied a much lower valuation than previous fundraising rounds. It was even described as the company’s “last gasp”.

On the other hand, a number of companies on this list do appear to be likely IPO targets. For example, the $150M raised by PURE Storage at the end of August has been described as the biggest ever round of financing for a data storage company, at an implied valuation of between $1 billion and $2 billion. This is a company almost certainly on the cusp of an IPO. And topping the list is Uber Technologies, which has been successful despite regulatory hurdles, and could be the next hot tech IPO.

It will be interesting to keep an eye on these companies. Which of them will go public? Whose IPO, if any, will be a success? Our guess is that tech start-ups like these will continue to be highly anticipated initial public offerings.

1. We based this research on the as-disclosed industry specification in Form D. Since there is some variability with the self-disclosures, we did further research to narrow the companies down to definite technology companies, including bio-technology. 

2. Based on a data download as of 10/4/13, for private placements with first sale dates between 1/1/13 and 9/30/13. For this analysis, we excluded pooled investments (e.g., hedge funds, venture capital, etc.).