Gulf money stalling tech IPOs

Cash infusions from companies such as SoftBank and Middle East funds are thought to be contributing to a technology startup IPO drought. (Reuters)
Updated 20 October 2017
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Gulf money stalling tech IPOs

LAGUNA BEACH, California: Big cash infusions for startups from an ever-expanding group of investors, led by SoftBank Group and Middle East sovereign wealth funds, have extinguished hopes that the technology IPO market would bounce back this year.
These deep-pocketed financiers, which have traditionally invested in the public markets but are seeking better returns from private tech companies, have enabled startups to raise more money, stay private longer and spurn the regulatory hassles of an IPO even as they become larger than many public companies.
At The Wall Street Journal D.Live conference this week in Southern California, a number of venture capitalists, entrepreneurs, IPO experts and dealmakers spoke with Reuters about the surprisingly low number of IPOs and pointed to investors such as SoftBank for changing the business of startup financing.
“It’s not surprising if these companies get 10 term sheets,” said Nicole Quinn, an investing partner with Lightspeed Venture Partners, referring to formal offers of investment.
The result is a protracted IPO slump that has contributed to a 50 percent drop in the number of US public companies over the last two decades, according to the Nasdaq. IPOs have fallen especially precipitously since 2014 — the year public market investors, including mutual funds, ramped up investment in private tech companies.
There are some signs of a more active fall for IPOs. Tech companies Switch, MongoDB and Roku have gone public in the past few weeks, with debuts from ForeScout Technologies and Zscaler ahead.
Yet many investors are bracing for a market tumble after a sustained rally, raising questions about IPO opportunities for 2018.
Just 12 venture capital-backed tech companies went public in the US in the first three quarters this year, compared to 27 for the same time period in 2014, according to IPO investment adviser Renaissance Capital.
The drought continues even though both the Dow Jones Industrial Average and Nasdaq Composite are up more than 26 percent in the last year and market volatility is low, normally ideal conditions for an IPO.
Wall Street stock indexes have posted a string of record highs in recent weeks, and the Dow closed above 23,000 for the first time on Wednesday.
But Barry Diller, a longtime dealmaker and chairman of Expedia, said the huge funding rounds had eliminated the traditional reason for an IPO.
“There is no reason to be public unless you need capital, and almost all these companies do not need capital,” Diller said.
Increasingly, the big checks are coming from SoftBank, which in May closed a $93 billion investment fund.
So far this year, it has announced at least 14 investments in technology companies globally, including a $500 million deal with fintech company Social Finance and a $3 billion investment in shared workspace company WeWork, both private and already worth billions of dollars.
SoftBank is in the next week expected to finalize a highly anticipated deal with Uber Technologies in which it, along with other investors, would purchase as much as $10 billion in Uber shares, most of them from employees and existing investors in a so-called secondary offering.
“This is the third liquidity option,” said Larry Albukerk, who runs secondary market firm EB Exchange and spoke to Reuters by phone. “It used to be IPO or acquisition.”
SoftBank’s deals are causing venture capitalists to “prepare for more M&A exits,” and fewer IPOs over the long term, said Jenny Lee, managing partner at GGV Capital.
Meanwhile, Nasdaq’s private market business, set up in 2014, facilitated more than $1 billion in secondary market transactions last year, according to Bruce Aust, vice chairman of Nasdaq.
Secondary transactions allow employees and investors to get some cash by selling to other private investors, removing a significant pressure to go public.
The flood of private capital, and the lofty valuations that have come with it, have, paradoxically, created another reason for avoiding an IPO, said Chris Clapp, a managing director with consulting group MorganFranklin.
“Many times with my clients I don’t think they would achieve the same valuation in the public markets,” Clapp said in a phone interview.
Meal delivery company Blue Apron Holdings took a 27 percent haircut when it went public in June and software company Cloudera lost 53 percent of its valuation in its April IPO.
Snap, the owner of messaging app Snapchat, is down more than 10 percent from its IPO price in March.
— Reuters


Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

Updated 14 December 2018
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Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

  • Ransom payment would set dangerous precedent
  • NOC declared force majeure on exports on Monday

BENGHAZI: Libya’s state-owned National Oil Corp. (NOC) said it was against paying a ransom to an armed group that has halted crude production at the country’s largest oilfield.
“Any attempt to pay a ransom to the armed militia which shut down El Sharara (oilfield) would set a dangerous precedent that would threaten the recovery of the Libyan economy,” NOC Chairman Mustafa Sanalla said in a statement on the company’s website.
NOC on Monday declared force majeure on exports from the 315,000-barrels-per-day oilfield after it was seized at the weekend by a local militia group.
The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for NOC said, without giving an output figure. The field usually pumps around 70,000 bpd.
Since 2013 Libya has faced a wave of blockages of oilfields and export terminals by armed groups and civilians trying to press the country’s weak state into concessions.
Officials have tended to end such action by paying off protesters who demand to be added to the public payroll.
At El Sharara, in southern Libya, a mix of state-paid guards, civilians and tribesmen have occupied the field, camping there since Saturday, protesters and oil workers said. The protesters work in shifts, with some going home at night.
NOC has evacuated some staff by plane, engineers at the oilfield said. A number of sub-stations away from the main field have been vacated and equipment removed.
The occupiers are divided, with members of the Petroleum Facilities Guard (PFG) indicating they would end the blockade in return for a quick cash payment, oil workers say. The PFG has demanded more men be added to the public payroll.
The tribesmen have asked for long-term development funds, which might take time.
Libya is run by two competing, weak governments. Armed groups, tribesmen and normal Libyans tend to vent their anger about high inflation and a lack of infrastructure on the NOC, which they see as a cash cow booking billions of dollars in oil and gas revenues annually.