That giant sucking sound on Wall Street

Contact: Brenon Daly

After a hard freeze last winter, there are signs of new growth on Wall Street this spring, with a pair of tech startups reportedly soon set to join the ranks of US public companies. After more than three months of silence, both SecureWorks and Nutanix have recently updated their IPO paperwork and have indicated that their offerings are back on track. In a more receptive market, the two companies would already be public by now. (Assuming that Nutanix does indeed debut, for instance, it will have been on file with the SEC more than twice as long as Pure Storage, which went public last fall.)

The offerings would also come after a quarter in which startups were shut out of the public market. Not a single tech vendor went public in Q1, the first time that has happened since the recession years. (451 Research subscribers: See our full report on Q1 activity, including the IPO shutout and the implications on the tech M&A market.)

Yet, even if SecureWorks and Nutanix do manage to join the public market, the new arrivals will do little to offset the number of tech companies leaving the public ranks. Already this year, we’ve seen 16 firms erased from the Nasdaq and NYSE exchanges, according to 451 Research’s M&A KnowledgeBase. (To be clear, we are including only full acquisitions, and excluding divestitures.) The departures have ranged from household names (Ingram Micro, ADT) to somewhat faded businesses (LoJack, LeapFrog). Altogether, the announced transactions for public companies have siphoned off nearly $32bn of value from the two main US exchanges.

The net outflow of tech firms from the US exchanges is, of course, nothing new. (In 2015, according to the M&A KnowledgeBase, 79 tech companies got erased.) But it stands out all the more this year as – thus far – there haven’t been any offsetting offerings. And even as SecureWorks, Nutanix and others work their way toward a listing, other vendors are looking like they could very well get pushed off of Wall Street. Both Citrix and Qlik have drawn interest from a hedge fund with a record of pushing businesses to sell.

Projected number of tech IPOs

Period Average forecast
December 2015 for 2016 19
December 2014 for 2015 33
December 2013 for 2014 29
December 2012 for 2013 20
December 2011 for 2012 25
December 2010 for 2011 25
December 2009 for 2010 22
December 2008 for 2009 7
December 2007 for 2008 25

Source: 451 Research Tech Corporate Development Outlook Survey

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.