Stack of S-1s
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Why everyone wants to go public right now

Protocol Index

Hello! This week: Why everyone's going public right now, what we've learned from the S-1s, and Akamai's CFO tells us his favorite Excel trick.

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  • "In addition to resilient earnings growth, tech has healthy balance sheets and strong cash flow generation, again in contrast to the 2000 episode." — JP Morgan analysts said the tech rally can still go further.
  • "We should be well beyond this idea of separate but equal … But in venture it seems as if we are moving right back there." — Cake Ventures' Monique Woodard said VCs need to do better at investing in Black founders.
  • "The reason we don't cap it: We want it to be just as similar to an IPO … If there is strong demand, well then the company will actually raise more capital at a higher price." — Nasdaq's Jay Heller explained to me why the exchange's proposal for direct listings with capital raises doesn't limit stocks' opening price, unlike the recently approved NYSE approach.
  • "In China economic power can potentially become political power. But if you are under that threshold, you are below the radar." — Hong Kong University's Chen Zhiwu said that private companies can only get so big before the Chinese government will interfere.

The Big Story

Why is everyone filing this week?

So much for a quiet August. This week saw a ton of big-name tech filings, with everyone from Snowflake to Palantir disclosing their financials ahead of their listings. We'll get to the S-1s themselves shortly, but first an important question: Why now?

For one thing, Labor Day. "There is a 15-day period from the time a company publicly files its S-1 to when it can commence a road show," Wilson Sonsini partner Mark Baudler told me. "Filing publicly this week will enable those companies to commence a roadshow after Labor Day." Citi's co-head of North America equity capital markets, Paul Abrahimzadeh, agreed.

  • But why this week rather than last week? "Some of them probably want to start the road show after [Labor Day …] they they don't like the road show to be interrupted by a holiday," University of Florida professor Jay Ritter explained.

But there's more to it than just a three-day weekend. Despite economic turmoil, the markets are reaching record highs, so "there's a lot of optimism" right now, Nasdaq's head of capital markets, Jay Heller, told me. Companies that had started the capital-raising process earlier this year are now "looking to accelerate" their plans, he added.

  • Moor Insights President Patrick Moorhead put it simply: "Valuations for technology companies are higher than they have ever been, and startups want to hurry up their filings to maximize company values."

And there's risk in leaving it too late, too, Moorhead thinks. "There is some fear that if a Biden-Harris ticket wins the election, tech company values will plummet, so timing is of the essence," he said. Heller echoed that, saying that there's always a "cat and mouse game" in election years. That could lead to an IPO slowdown in November, depending on the election result.

For now, though, don't expect a breather. "Post Labor Day, I think the wheels come off again," Heller said. "I think it's going to be really, really busy." Better rest up, then.



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Up to Speed

  • Monday: Sumo Logic filed for an IPO. Unity filed for an IPO. Snowflake filed for an IPO. JFrog filed for an IPO. Amwell filed for an IPO, and Google invested $100M in it. Asana filed for a direct listing. Luminar said it would go public via a $3.4B SPAC merger. Apple bought Spaces. Smartsheet bought Brandfolder for $155M. Palo Alto Networks bought Crypsis for $265M. Tencent was reported to be taking Leyou private at a $1.3B valuation. Arm called off two IoT spinoffs.
  • Tuesday: Ant filed for an IPO. Palantir filed for a direct listing. Aveva bought OSIsoft for $5B. MelodyVR bought Napster for $70M. WorldRemit bought Sendwave for a reported $500M. Cisco bought BabbleLabs. ConsenSys bought Quorum. Redis Labs raised $100M at a $1B+ valuation. Salesforce earnings beat expectations. HPE earnings beat expectations. TPG was reported to be raising a tech SPAC.
  • Wednesday: Xiaomi earnings beat expectations. Box earnings beat expectations. Delivery Hero bought InstaShop for $360M. BlueCity bought LESDO. Desktop Metal said it would go public via a SPAC at a $2.5B valuation.
  • Thursday: The Fed changed its inflation-targeting policy. Walmart said it was bidding with Microsoft for TikTok. Oracle was reported to be bidding $20B for TikTok. Kioxia Holdings filed for a $3.3B IPO at a $20B valuation. The Hut Group said it was planning an IPO at a $6B valuation. HP earnings beat expectations. Dell earnings beat expectations. VMWare earnings beat expectations. Nutanix earnings beat expectations, and Bain Capital invested $750M in it. Klarna's net loss jumped. Fastly bought Signal Sciences for $775M. RWS bought SDL for $1B. Walmart sold and Bare Necessities. Xpeng shares soared on listing.
  • Today: SoftBank Group said it would sell $12.5B of its SoftBank Corp. stake.

Diving Deeper

Everyone's got some big risks in common

So what have we actually learned from all the filings? An awful lot. On Protocol, David Pierce ran through Snowflake, Unity, Asana, Amwell, JFrog and Sumo Logic's prospectuses, and you should have received our special reports on Ant and Palantir earlier this week.

But perhaps the biggest takeaway is that all the companies share some major risks in common. Much of that was neatly encapsulated in Unity's S-1, where the risk factors section read like some kind of greatest hits of challenges facing all modern tech companies.

  • The reliance on Big Tech is overwhelming. Unity, for instance, pointed out that it relies on Apple and Google's app stores and operating systems. Others wrote about their reliance on AWS, Google Cloud and Microsoft Azure. Any of the tech giants could make the lives of these companies very hard.
  • Regulation makes these companies nervous. Unity was also one of many to discuss privacy practices, like Apple's move to kill IDFA, Europe's GDPR and California's CCPA. Palantir and Ant both mentioned the potentially burdensome — and seemingly inevitable — costs of complying with legislation.
  • Then there's COVID, although no one seems to know quite how that'll affect their business. Unity did point to an interesting side effect of the pandemic, saying "there is no guarantee that we will be as effective while working remotely." (Palantir might win for best COVID-related disclosure, though, saying that it's saved the company $1.4 million in travel costs!)
  • But the biggest and most uncertain threat? Geopolitics. Again, Unity is emblematic of the broader industry, discussing the impact that deteriorating U.S.-China relations could have on its large Chinese business. The Chinese company Ant unsurprisingly goes further, warning that it could face "protectionist policies and regulatory scrutiny" that could hamper its international expansion. Palantir, meanwhile, outright refuses to work with China, warning investors that the decision limits its total potential revenue opportunity.

We'll see in the coming weeks whether investors are willing to tolerate these risks. Given the current state of markets and tech stocks, I'd be amazed if they aren't — which makes you wonder if there's anything they won't tolerate?

Money Talks

Ed McGowan, Akamai CFO

What's one thing people didn't pay enough attention to this week?

The U.S. dollar. The move lower in the U.S. dollar since the end of May has been pretty significant, something any company with operations outside the U.S. should pay close attention to.

What's your favorite Excel trick?

Goal Seek. Using Goal Seek, Excel can quickly help determine a variable in a formula when you know the desired result of the formula but are not sure of all the inputs (e.g. determining an interest rate when you know the payments, loan amount and term but not the rate).

What tech stock do you have your eye on?

None at the moment. Valuations in general look stretched, especially when you see companies that are losing money and trading at 20+x sales.

What's been your worst financial decision?

I bought Lehman Brothers stock the weekend before the government decided not to back them. I was betting on the government bailing them out. And we know how that turned out.

What was the most overlooked or overhyped deal of the last 12 months?

Overhyped: Some recent tech IPOs that are trading at crazy valuations.

Overlooked: What is happening with some of the financing in investment grade credit, specifically. There is some amazing long-term straight debt financing being closed at rates in the 1 to 2% range.

Up Next

  • There's an eclectic mix of earnings next week: Zoom and Rackspace report Monday; Jamf on Tuesday; Crowdstrike, MongoDB, Smartsheet and Cloudera on Wednesday; and it's capped off by Broadcom, CD Projekt and Docusign on Thursday.
  • The big non-farm payrolls report is out Friday, with investors hoping for 1.5M job additions. And I'd bet we might see a few new S-1s, too.



Stronger care … from anywhere, to anywhere

A strong healthcare system can scale to meet increasing patient demands. At Philips, we're charting a new way forward by moving care beyond the hospital's walls with advanced virtual health capabilities that expand clinical reach and increase care team capacity.

Learn more.

Thoughts/feedback/tips? Email me — — or And subscribe to get Index in your inbox every week. Thanks for reading — have a great weekend, and see you next week.

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