One of the reasons Uber wants to stay private, and why you should to

There are many reasons Uber wants to stay private and I can tell you one for certain: Uber wants to stay private because the public markets absolutely clobber underperformance and missed expectations, which is also a good reason for you to stay private as long as you can.  At DAN Fund we monitor 47 publicly traded tech companies (45 are SaaS, 2 are hardware) and recently did an analysis that tracks their annual compounded return since IPO.  The data shows that of the 47 companies, 23 have outperformed, meaning they have had an annual compound return in excess of 8%, and 24 have underperformed.  In some case, the underperformance is dramatic.  First, a list of the good performers.

 

GOOD PERFORMERS Price Open Price  
Company at Open Date on 5/18/16 Return
Shopify $17.00 May-15 $26.34 55%
2U $13.00 Mar-14 $26.93 40%
Zendesk $13.43 May-14 $23.59 32%
Proofpoint, Inc. $16.85 Apr-12 $52.43 32%
ServiceNow $24.60 Jun-12 $70.03 31%
BroadSoft, Inc.  $8.25 Jun-10 $40.35 31%
SalesForce $4.30 Jun-04 $77.87 28%
Hubspot $30.10 Oct-14 $44.17 27%
Qualys, Inc. $12.00 Sep-12 $26.98 25%
SPS Commerce, Inc. $14.00 Apr-10 $51.88 24%
MindBody $11.56 Jun-15 $13.60 19%
Ultimate Softare $8.50 Jun-98 $191.17 19%
Athenahealth, Inc. $30.00 Sep-07 $129.98 18%
LogMeIN, Inc. $20.00 Jul-09 $57.34 17%
Instructure $16.00 Nov-15 $17.16 15%
Cornerstone $18.00 Mar-11 $36.12 14%
Demandware $25.25 Mar-12 $42.46 13%
Medidata Solutions $18.00 Jun-09 $41.71 13%
Atlassian $21.00 Dec-15 $22.12 13%
WorkDay $48.69 Oct-12 $72.72 12%
Lifelock $8.38 Oct-12 $11.75 10%
Netsuite $35.50 Dec-07 $77.70 10%
Splunk $35.48 Apr-12 $50.21 9%
RealPage, Inc. $13.00 Aug-10 $20.97 9%
         
Median       19%
Average       21%

 

The median and average annual compound returns through May 18th of the 23 companies are 19% and 21% respectively, with a range of 9% to 55%.  We’ve highlighted two in particular, Salesforce and Ultimate Software, which have had such great returns for so long that an investor on the day of the IPO would today be doing quite well: had you invested $1 in either of their IPO’s, you’d be sitting on $18 and $23, respectively. 

 

The 24 weaker performers are shown below, and as you can see the returns are very poor as Wall Street has punished these companies for underperformance and missed expectations. 

 

POOR PERFORMERS Price Open Price  
Company at Open Date on 5/18/16 Return
LinkedIn $94.25 May-11 $128.39 6%
Five9, Inc.  $7.95 Apr-14 $8.85 5%
Marketo $23.10 May-13 $26.81 5%
Textura $24.00 Jun-13 $26.00 3%
RingCentral, Inc. $17.25 Sep-13 $18.29 2%
LivePerson Inc. $8.75 Apr-00 $6.08 -2%
Cvent, Inc.  $38.00 Aug-13 $35.59 -2%
Appfolio $13.70 Jun-15 $13.34 -3%
Xactly $8.70 Jun-15 $8.23 -6%
Benefitfocus, Inc. $42.50 Sep-13 $34.48 -8%
Intralinks $13.00 Aug-10 $7.30 -9%
New Relic, Inc. $30.16 Dec-14 $25.83 -10%
Veeva Systems Inc. $38.00 Oct-13 $27.80 -11%
Jive Software, Inc. $15.12 Dec-11 $3.66 -27%
BazaarVoice $16.51 Feb-12 $3.42 -31%
Secureworks $14.00 Apr-16 $13.58 -34%
MobileIron, Inc. $10.00 Jun-14 $2.99 -46%
HortonWorks $26.38 Dec-14 $10.19 -49%
GoPro $31.34 Jun-14 $8.80 -49%
Marin Software $19.00 Mar-13 $2.15 -50%
Box Inc $23.23 Jun-15 $11.64 -53%
Fitbit $29.68 Jun-15 $14.13 -55%
Castlight Health $37.50 Mar-14 $4.17 -63%
         
Median       -10%
Average       -21%

The median and average annual compound returns through May 18th of the 24 companies are -10% and -21% respectively, with a range of -63% to 6%.  Some of the most recognizable names are particularly poor performers including Box, Fitbit, GoPro, and BazaarVoice. 

 

As the data shows, the public markets are unforgiving, punishing those companies that miss expectations or show any weakness.  It’s a good reason to stay private as long as you can and no doubt Uber and other have taken notice.

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