If the Twitter IPO gets done and gets done successfully, it will signal a full-on late-nineties style tech bull market. Kiddie up! Yes Facebook, LinkedIn and others were key to firing up the long dormant Tech IPO machine, but Facebook’s raunchy debut left tech investors smarting for a full year and only now are they starting to smile again – see the chart below.
But now that no one is losing money on Facebook, and other smaller tech IPOs have generally been successful and investors generally have nowhere else to go with their risk capital, (Resources? – no, Energy? – not really, Emerging markets? – yuk, Bonds? – double yuk, etc.) the Tech IPO machine could really kick into high gear and Twitter could be a great measure of this.
We believe Twitter will approach the IPO market with more prudence than Facebook did and everyone from the VCs to the underwriters will be a little more focused on making it a success. And if it’s done right, the VCs AND the public investors will both make money.
So what does the return of the Tech IPO market mean to Difference? Lots. We have over 20 investments that could eventually benefit from a healthy public market for IPOs. Some are more ready than others, and we will need to see the IPO appetite trickle down from large US IPOs to smaller names … and to Canada! But ultimately we believe Difference offers a good call option on the return of this market. So please tweet away – start by re-tweeting this!
Tom Astle, CFA, P.Eng, Head of Investment Strategy, Difference Capital