After Alibaba, the IPO market begins long slide lower

Contact: Brenon Daly

The record-setting offering by Alibaba in mid-September stands as the clear peak for IPOs in 2014. The only question is how sharp the decline will be for the rest of the year.

So far, the slope hasn’t been that steep. CyberArk followed quickly on the heels of the offering by the Chinese e-commerce company, with the online identity management vendor nearly doubling on debut and holding up solidly in the aftermarket. That was followed a week later by online home furnishings retailer Wayfair pricing above its expected range and soaring onto the NYSE at a valuation of more than $3bn. And then last week, marketing automation provider HubSpot surged onto the public market, trading at about 10x trailing sales. (Subscribers: See our report on the HubSpot IPO).

After this batch of IPOs, however, the drop-off accelerates. Currently in the pipeline are companies that are looking like they will be tough sells on Wall Street, including the deeply unprofitable GoDaddy, the profligate Box and the old-line consolidator Good Technology. (We would note that both Box and Good Technology seem to have acknowledged that they may not be pulling in any money from Wall Street any time soon, and have retreated to raising from late-stage investors again.)

Looking at the calendar, it’s unlikely that many other companies are aiming to hustle and get in their IPO paperwork and go public before the end of the year. That’s particularly true as the equity markets hit a rough patch. Both the Nasdaq and the S&P 500 dropped about 4% just last week, the sharpest weekly decline in more than two years. Volatility also ticked up substantially. Put that all together, and it’s looking like a long slide to close 2014 for new offerings.

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