Twilio surges in IPO debut, hopeful sign for tech unicorns

Twilio, the first unicorn to go public this year, burst out of the IPO gates Thursday, surging 92% to $28.79 a share in its first day of trading.

Its emphatic public-market debut on the New York Stock Exchange — it set its IPO price at $15 late Wednesday, above an expected range of $12 to $14 — broke a tech IPO drought and could open the markets to more of its unicorn breed. (Unicorns, privately held start-ups valued at $1 billion or more, include Uber, Airbnb, Snapchat and Dropbox.)

Though some investors cautioned against hyping the first-day pop, the debut fanned excitement simply because new issues have become relatively rare.

There have been just 40 IPOs priced in the U.S. this year, down 54% from a year ago, according to Renaissance Capital. Twilio's first-day spike made it the largest of four tech IPOs this year, as measured by market value (nearly $2.4 billion). That initial success could persuade wary Wall Street investors to consider more IPOs after a volatile market, interest-rate uncertainty and steep declines in venture funding all but smothered the notion. .   .

The cloud computing company (TWLO) lets developers incorporate voice and text message services into their applications. Uber, Nordstrom, Box and Coca-Cola are among the 28,000 companies that use Twilio's software to send notifications and interact with users.

The company used the IPO to advertise its coding chops by tweeting "Hello NYSE and installing developers at stations on the NYSE floor for a  "Code Jam."

The first-day showing of Twilio was also distinguished because it is the first IPO to price above its proposed range since Atlassian, another tech unicorn, debuted in December 2015, said Renaissance Capital.

Twilio prices IPO above range, a litmus test for unicorns

The impact of Twilio's IPO extends far beyond the Silicon Valley unicorn: It is likely to be a litmus test for the public market's appetite for private tech companies. Twilio’s IPO pricing gave it a market value of $1.23 billion, north of the $1.03 billion valuation investors placed on it during its last private round of financing last year. The 9-year-old company, which has yet to turn a profit, said sales surged 88% to $166.9 million in 2015.

Unicorns, of which they are an estimated 169, have become a rarer breed following several years of torrid growth — just 20 were created in the first three months of 2016, according to market researcher CB Insights

Tepid IPOs from SecureWorks in April and Square last year threw further cold water on Wall Street's interest in the sector. Mobile-payments start-up Square spooked some investors because it jumped nearly 50% its first day of trading in November 2015, raising the hopes of other tech IPO candidates, before it began an inexorable decline.

But that is gradually changing after the stock market's comeback from a rocky beginning this year, says Neil Dhar, a partner at PwC. "There has been a pick-up in recent months," he says.

Acacia Communications, a maker of high-speed interconnect products, launched a successful offering last month: Its stock is up more than 70% from its initial IPO price.

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