Tech ‘unicorn’ Twilio leaps in debut

By Richa Naidu

(Reuters) – Shares of software maker Twilio Inc surged as much as 72 percent in their debut on Thursday, raising hopes that investor appetite for U.S. tech IPOs is finally returning.

Twilio’s strong debut, which valued the company at as much as $2.12 billion, coincided with a rally in global stock markets on indications that most Britons would vote on Thursday to remain in the European Union.

The stock rose to a high of $25.84 in morning trading on the New York Stock Exchange. The 10-million share offering was priced at $15 each, above the expected range of $12-$14.

Twilio’s IPO, the first offering from a technology “unicorn” this year and only the third by a tech company this year, was seen as a test of investor appetite for IPOs.

Up to Tuesday, the U.S. technology IPO market had raised just $322 million this year, down from $3.35 billion in the same period last year, hurt by the poor performance of many recent IPOs. The overall U.S. IPO market is set for its worst year since the financial crisis.

Analysts have said a successful debut by Twilio may help stimulate offerings by other tech “unicorns” – startups that have a valuation of at least $1 billion.

“(This year) has really been an arid desert in new issuance and equity … I’m encouraged that the success here will spawn other IPOs,” Jack Ablin, chief investment officer of BMO Private Bank told Reuters.

Mutual fund manager T. Rowe Price Group Inc, a late-stage investor in Twilio, had indicated that it was interested in buying 15 percent of Twilio’s IPO.

San Francisco-based Twilio’s customers include WhatsApp, which accounted for about 15 percent of the company’s revenue in the three months ended March 31. Twilio, in its IPO prospectus, identified this concentration of revenue as a potential risk.

Car-hailing service Uber [UBER.UL], whose drivers use Twilio’s software to speak and text with passengers without exchanging contact information, is also a major client.

Twilio said the $150 million raised from the offering would be used to build its business and potentially buy others.

The company reported a 77.9 percent jump in first-quarter revenue to $59.3 million, while its net loss narrowed to $6.5 million from $8.7 million.

Twilio was founded in 2008 by three entrepreneurs including current CEO and Chairman Jeff Lawson, who retains a 10.4 percent stake in the company, according to the prospectus.

Goldman Sachs & Co, J.P. Morgan, Allen & Company LLC and Pacific Crest Securities were among the IPO’s underwriters.

(Reporting by Richa Naidu in Bengaluru; Editing by Saumyadeb Chakrabarty)