SAAS IPOs Are Outperforming in the Rebound
- Since the public equity markets bottomed out around March 23, high-growth SaaS companies that IPO’ed in 2018 or 2019 have been among the strongest performers
- That group is now trading above where they were in February,when the broader markets peaked and started their freefall. “Work from home” stocks (like Zoom and DocuSign), and companies that make managing a business remotely (like Bill.com), are leading the pack higher
- If you had invested equally in the IPO prices of all of the 26 SaaS IPOs from 2018 and 2019, your investment would be up 110% as of the market close on May 7, with 23 of the 26 investments in the black
- Had you invested in all of their most recent pre-IPO rounds, your investment would now be up about 5x
In a previous post, called “How Are 2019 SaaS IPOs Holding Up in the Downturn?,” I discussed the 2019 SaaS class of IPOs, and indicated that 2019 was a great year to go public as a SaaS company.
I noted that 12 of them floated their shares for the first time last year, at a time when the sector was trading at historically high multiples. I pointed out that while these stocks had IPO’ed at an average multiple of 15x their enterprise value to trailing twelve months of revenue (“EV / LTM”), they continued to command a multiple of just over 17x in mid-April.
This is an update to that post, and now I’ve included the 2018 IPOs as well.
Figure 1: 2019 SaaS Class of IPOs
Figure 2: 2018 SaaS Class of IPOs
Back in late March, when I wrote my first post, SaaS as a class traded off with the rest of the market … panic selling hit just about every asset class equally and indiscriminately, as investors looked for liquidity. But since stocks bottomed around March 23, at a trough that was between 34% (the mega cap S&P 500, ) and 42% (the S&P SmallCap 600 Index, a market-weighted basket of stocks that have market caps of a total market capitalization of $600 million to $2.4 billion at the time of addition to the index) lower than the peak, the market has begun to pick and choose which…
