IPOs, Direct Listings, and Billion Dollar Acquisitions
Welcome to another edition of the Weekly Financial Digest!
Each week, the team here at Lola bookmarks our favorite articles about corporate finance. Then, we take those and summarize them for you.
This week, we’re covering all aspects of companies that have gone public. We looked at the acquisitions they’ve made, the returns they’ve had, the difference between direct listings and IPOs, and a whole lot more!
History of Public SaaS Returns and Valuations
Since 2004, there have been 70 SaaS companies that have gone public. Alex Clayton, the author of this piece, wanted to dig into the trading history of all 70 of these companies. To do that, he started by studying their S-1 filings.
Overall, these companies have performed exceptionally well on the public markets. The average return is 5.3x, and that’s happened in only 3.4 years on average.
The biggest winners over this period are:
- Shopify with a 18.9x return
- ServiceNow with a 16.6x return
- Paycom with a 16.0x return
Really interesting insights from this one.
The 5 biggest takeaways from the Spend Trends Report 2019
Spendesk recently released a report that analyzed the spending trends of 1,000 of their users. The results are pretty interesting. They found:
- Amazon is, by far, the biggest source of business transactions. Of the 800,000 transactions that Spendesk analyzed for the report, 41,516 of them went to Amazon.
- Uber has taken over as the number 1 ground-travel choice for Spendesk users.
- SaaS spending has increased 267.91% since 2016.
- Travel spending has also increased 217.85% since 2016 (Lola can help with that, by the way).
- Marketing spends more than any other business unit. Most of that spend goes to advertising platforms that marketing uses.
Plenty more to learn from Spendesk on this one.
All about Direct Listings
Direct listings are a relatively rare way to take a company public. We’ve seen it twice recently with Spotify’s Direct Listing last year and Slack’s just a few weeks ago.
Even though only two companies have gone public this way, Andreessen Horowitz thinks that we’ll see a lot more of this in the future.
So what are the big differences between IPOs and Direct Listings? First, a Direct Listing means that the company isn’t issuing any new shares. All shares will be sold from existing shareholders. This is likely VCs, company employees, and other stakeholders.
Another difference is that there is no “lock-up” period with a Direct Listing. With a traditional IPO, existing shareholders are unable to sell stock for a specific period of time - usually 180 days after the IPO. This doesn’t happen in a Direct Listing.
There’s a lot more to learn on this topic. Click this link to read the rest.
A CFO’s Perspective on Data Security
According to Oracle, the CFO should be in charge of data security. Not IT. Why?
It’s pretty simple. Data security isn’t a matter of “will we have a data breach.” It’s a matter of “when will it happen?”
CFOs are uniquely qualified to plan for that because they’re already good at planning for risk and complying with regulations. Those are the two biggest things that a Data Protection Officer needs to understand. On top of that, CFOs control the budget.
So, the CFO understands risk, can learn the regulations, and owns the budget. That clearly makes the CFO a natural fit for controlling data security.
Visualizing Tech Giants’ Billion-Dollar Acquisitions
Even though this post, from CB Insights, is mostly a visualization, there’s still interesting insight to pull out of it.
Facebook, Amazon, Microsoft, Google, and Apple have collectively made 750 acquisitions over the past 30 years. Some of those acquisitions have been very successful (Facebook acquiring Instagram, for example).
Others, have been total flops like Google’s acquisition of Motorola Mobility. What’s most interesting is that Microsoft has been the biggest spender with the most $1B+ acquisitions.
What’s happening in IPOs this week?
- Q2 of this year was the busiest quarter for IPOs in four years. 62 companies went public and raised a total of $25 billion.
- Virgin Galactic has plans to go public, which will make it the first human spaceflight company to go public.
- There aren’t too many notable companies going public this week, but there are still nine to choose from.