Splunk soars 109% in ‘big data’ tech IPO
SAN FRANCISCO (MarketWatch) — Shares of Splunk Inc. more than doubled Thursday in an initial public offering that carried high expectations for the business-intelligence software company. Splunk's stock SPLK +108.71% soared 109% to close up to $35.48 in its trading debut.
Context & Ripple Effects
Splunk came to market the same day it priced its IPO at $17 a share — already above the $11-$13 range marketed to investors, and enough to value the machine-data analytics firm at $1.6 billion before trading began. The debut then blew past even that raised bar: a 109% first-day close at $35.48, confirmed across the wire.
The story traveled unusually wide for a single-session event — pickups at Bloomberg, Fortune, AllThingsD, ZDNet and Data Center Knowledge among others — which itself signals how closely the Street was watching whether public appetite existed for 'big data' software after the offering had been sized.
First-order effects
- Buyers allocated stock at $17 double their money before the first full session ends, while Splunk's own proceeds were locked in at the offer price — the company sold its equity for less than half what the market paid by the close.
- Pre-IPO shareholders and employees see their stakes revalue upward immediately, converting a $1.6 billion private-market valuation into a public one worth more than twice the deal price.
Second-order effects
- Underwriters who pushed the range from $11-$13 to $17 and still left a 109% first-day gain on the table face pressure from the next enterprise-software issuer to price hotter or size larger, because the demand signal here was unambiguous.
- Other private companies sitting on machine-generated data — the exact category Splunk's listing just validated — gain a fresh argument for filing, knowing the public market paid a premium for this profile.
Third-order effects
- If debuts like this repeat, big-data analytics hardens into a named public-market category with its own benchmark multiples, pulling venture-backed data companies toward earlier listings rather than extended private stays.
- A consistent gap between offer prices and first-day closes would erode banker pricing discipline on hot enterprise deals, shifting negotiating leverage toward issuers when windows reopen.
The trend: Public markets are re-rating enterprise data-analytics software far above what bankers price it at, making big data one of the categories investors are willing to pay a debut premium for in 2012.