A group of executives from ServiceNow, a Del Mar company headed by CEO Frank Slootman, traveled to the Big Apple on Friday for a very important occasion. The company officials were on hand at the New York Stock Exchange to ring the opening bell and celebrate ServiceNow's initial public offering of stock.
ServiceNow's roots go back to 2003 when founder and current chief product officer Fred Luddy left Peregrine Systems and helped businesses use the technology of cloud computing. In 2005, ServiceNow hired its first employees.
Investors cheered the arrival of the company's stock. Priced at $18 a share, ServiceNow finished its first day of trading on Friday at $24.60.
The IPO of ServiceNow was one of the most closely watched since the fiasco associated with the arrival of Facebook in May. Raising $16 billion in one of the biggest IPOs ever, Facebook stock hit the street at $38, well above what underwriters had originally anticipated. It wasn't long before the stock had plunged to $25, and it continues to trade well below its listing price.
A survey of investment professionals from the TABB Group, a capital markets advisory firm, found the investor confidence impact of the Facebook IPO is almost as great as the Flash Crash, which rocked the markets in May 2010.
In addition, 39 percent of the investors surveyed believe the disruptive Facebook offering will limit IPO activity in various ways for at least two years. Evidence of that impact is the sharp decline in IPO activity so far this year. According to Renaissance Capital, there have been 107 priced global IPOs so far this year, down more than 51 percent from the same period a year ago. Total proceeds from this year's IPOs come in at $49.9 billion, down 47.7 percent from the same period in 2011.
However, the pace of offerings could be ready to pick up as the third quarter gets under way.
“With four IPOs ready to price, it appears the market window has opened despite some turmoil," said Jackie Kelley, IPO leader for Ernst & Young LLP. "However, windows can close as quickly as they open. Therefore it is very important for companies to prepare in advance and be ready to go public when the timing is right for them.”
The pace of offerings could pick up dramatically in coming months as a result of a provision in the JOBS — Jumpstart Our Business Startups — Act. The goal is to create an “IPO on-ramp” for emerging growth companies with less than $1 billion in revenues in their prior fiscal year.
An Ernst & Young report points out the legislation allows these companies to act quickly and confidentially when planning to go public. They do not have to publicly disclose they are going public until 21 days before they begin marketing the offering with a road show.
“The ability to file confidentially as a result of the JOBS Act now makes it challenging to gather a complete picture of the IPO pipeline or have a sense for when companies that filed confidentially will choose to test the market,” said Herb Engert of Ernst & Young.
While few companies that could benefit from the relaxed rules are likely to gather the headlines of Facebook, they could benefit from the fast-track filing system designed to help them get access to capital to finance the next stage of growth.
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