Nutanix has jammed open the window for U.S. initial public offerings. The cloud data-storage firm’s stock popped a whopping 131 percent on its debut on Friday, for a market capitalization above $5 billion. The warm welcome extended to new companies in September, combined with decreased venture-capital funding, may lead others to pull the trigger. The upcoming U.S. presidential election means they’d better hurry.
It’s true that Nutanix got lucky. A general market rally on its first day of trading – partly on the back of reduced concern about the stability of Deutsche Bank as the German lender negotiates a big settlement with U.S. prosecutors – put the wind behind stocks. But Nutanix’s business, selling cheap and easy ways to build out data centers, is also at the center of the latest tech wave.
Overall, it has proved a tricky year so far for new and risky companies to sell shares to the public. Only about half as many businesses have floated as in the same period last year, according to Renaissance Capital. To attract investors, solid firms have been priced attractively. The valuations of networking firm Acacia Communications and cloud voice and messaging firm Twilio both trade at more than four times where their IPOs priced earlier this year. And Nutanix can boast the best first-day gain of all.
Performances such as these have helped bring on a thaw. Sixteen companies floated last month. That’s more than twice as many as in September 2015, and it’s the first month this year with more IPOs than last year.
Another incentive to go public now is a tightening of purse strings at private investment firms. The amount of venture capital invested in the second quarter was down 11 percent from the same period in 2015, according to Thomson Reuters data – the third straight quarter showing a double-digit decline.
Firms may, however, have little time to take advantage. Later in October, investors will be preoccupied with the U.S. election, which takes place on Nov. 8, and thereafter they will be trying to figure out what the new president and congressional makeup mean. Nutanix has created the opening, but it may be brief.