Snap Inc appears set to make a splash next week with the biggest tech stock debut since Facebook Inc, but history suggests investors shut out of the initial public offering would be better off waiting a bit to chase this unicorn on the open market.
Globally, shares of most of the 25 largest technology IPOs have languished in their first 12 months on the public market, with 16 of them notching a hefty decline from their debut day closing price, according to a Reuters analysis of market performance. Eight of the 10 biggest fell by between 25 percent and 71 percent.
Among U.S. tech IPOs, 14 of the 25 biggest fell in their first year, including nine of the 15 to raise at least $1 billion in their listings. Declines ranged from 9 percent to more than 80 percent.
Snap, the company behind the popular Snapchat app, is expected to raise between $2.8 billion and $3.2 billion, which could vault it into the five largest global tech IPOs of all time, according to Thomson Reuters Deals Intelligence data. It would rank third on the U.S.-only list.
Company executives have been on the road for the last week meeting with potential investors, and Thomson Reuters IFR reported on Friday that the deal is oversubscribed, meaning far more fund managers want a slice than can be accommodated. Potential IPO buyers appear willing to look past concerns about the company’s governance and lack of profitability and see it as a vehicle to play a red-hot market for tech stocks, the leading sector so far in 2017.
The deal is expected to price next week, and the stock will start trading on the New York Stock Exchange under the ticker SNAP on March 2.
ROUGH FIRST YEAR
Still, the track record for the largest tech IPOs may be one red flag.
The median year-one performance among the biggest tech debuts globally was a decline of 22.3 percent, with big stumbles among marquee names like Alibaba Group Holding Ltd and Facebook, ranked Nos. 1 and 2 respectively. Each dropped about 30…