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Ask HN: There are 5 S-1 posts on the front page, what explains the rush?
134 points by ladberg on Aug 24, 2020 | hide | past | favorite | 43 comments
Is it just because the stock market is doing "well" right now or is there some other explanation?

Links to the referenced 5, since one just dropped off the front page: Sumo Logic: https://news.ycombinator.com/item?id=24262251 Asana: https://news.ycombinator.com/item?id=24265430 Snowflake: https://news.ycombinator.com/item?id=24265041 JFrog: https://news.ycombinator.com/item?id=24264478 Unity: https://news.ycombinator.com/item?id=24261559

I understand the stock market very poorly and had the same question myself, so this may be way off the mark, but I wonder if it's because of pessimism in the economy that non-public investors are harder to milk right now. It's unusual to see this many S-1's on HN, even more unusual that I've heard of most of them before.

Macro assessments of "the economy" play some role in expectations, but the economy is not comprehensible as a monolith. The predictive value of assessments of the "economy" on any one specific business are basically useless.

Rather, individual businesses are evaluated on their own individual trajectories, physics, prospects, and teams. Many of these have done well in COVID times and have stories aimed at convincing investors that improved performance will continue- independent of, or in inverse relation to larger negative macro assessments.

I haven't read these S1s but am sure this is the case here.

There are also technical- financial technical, not technical technical- reasons that make one moment better than another for seeking capital, and now is "good" for certain kinds of companies. It is also lifesaving for others- like Kabbage being bought by Amex a couple weeks ago. Their business (I believe) has basically been destroyed by the pandemic so Amex was able to get a good deal.

You should just read the S1s. The stories they tell are in fairly straightforward language, amidst a lot of transparency and compliance gobbledegook. But if you know a little about the companies you can probably arrive at an opinion about their narratives.


I might be able to provide context as a money manager and employee of a pre-IPO startup that considered IPOing right now.

Companies prefer to IPO when they show the strongest growth as it likely will lead to the highest valuation at time of IPO -- regardless of other fundamentals (such as profitability). These companies are likely doing very well for a combination of reasons: - Lockdown has increased use of their services - The market is in a large upswing right now

This makes their growth look phenomenal to investors, and likely, their board members who want to cash out see this as an opportunity.

There has been a bit of a "dead zone" for around the last year with people thinking the market was going to slow down for a recession and it has been considered hard to "raise money". A lot of people also believe a longer recession is still coming (I'm one of them).

This means that we likely have a short window where growth / income look fantastic for a few companies. The next opportunity might be in 2-3 years.


Also, as an investor, I think this is terrible practice as I believe the fundamentals of the investment are far more important than black swan-type of events giving you a growth spurt.

There's a lot of demand for equities right now due to the low rates and more pessimistic outlook on other securities. I think that can help drive up the amount they can raise.

Asana lost 120m last year

Snowflake lost 350m last year

Unity lost 160m last year

Sumo Logic lost 43m last year

Jfrog lost 400k last year

Out of curiosity, is it normal for companies to IPO this far away from profitability, or is this a recent tech thing? I feel like it was a big deal when uber IPO'd so far away from profitability, now it seems standard.

In some cases it's OK. Many VC-pumped pre-IPO companies do that. As far as I understand the common strategy is to burn the surplus of investors' money on sales and marketing in order to pump up the company's revenue and thus capitalization. It is assumed that either the increased revenue will achieve greater economies of scale and will cover the high cost of sales and marketing. Or, if that didn't work, the marketing and sales expenses will just be rolled back and the company will continue growing organically, albeit with a lower capitalization.

"normal" in the last 10-15 years -- yes. That doesn't mean it's a good deal. The "recent" idea has been to project growth (rather than profit) as the primary metric, with the idea that eventually when "dominant" in the sector the money that goes into growth will multiply profitability.

I don't subscribe by this method.

Another thing to keep in mind is that IPOs are usually done for 1 of 3 reasons:

1) To allow an exit for investors

This means that you have to think you know more than their current investors do about their growth -- unless the investors have other specific timelines (sometimes they do), or else you're buying what someone else thinks is no longer a good use of capital.

2) To raise money

This means the company needs more cash, either for "growth" or because they will fail without it. Again, you should be certain that this company-in-need deserves more money.

3) To create a sense of "official-ness".

Some companies can be better respected in their industry and helps with their brand if they're public.

It's been reported that public CEOs often spend about 50% of their time working on matters that relate to simply being public. It's one of the reasons that Warren Buffett will sometimes take companies private after buying public ones -- to afford them more time and energy to work on the actual company. There's very little about going public that actually makes a company better.

Another big reason is to make it easier to do acquisitions.

It's a lot easier (for both sides!) to buy another company with your stock if there is more confidence in the valuation, that way everybody knows what they're getting (or giving away). One way to get a really, really solid valuation is to be publicly traded.

Yeah some of remember working for startups back when the rule of thumb was that you didn't IPO until you had had 5 profitable quarters - the the whole dotcom bubble happened and sort of broke sanity

Crazy losses, and I've not heard of one of these companies. Some people have. Cool.

You can employ 1000 people at 50k Euro a year plus infra without hitting these losses, and one on one thousand is surely to come up with something. Not that I'd jump to do that without having a revenue plan. Niche products of products burning a lot of cash doesn't make a lot of sense.

Investors want to make their exits by offloading the burden to the public.

I'd be really curious to see numbers on the net profitibality of the S&P500 and Nasdaq indexes.

Like, as a casual observer, it seems more common to hear of companies losing money than making money these days, especially outside of FAANG.

One explanation is just that submitters tend to imitate what's already on the front page.


I remember the same thing happening last year at the same time (late august), so my guess is that it that this timing has something to do with financial optimization of S-1 filings.

When prices are high, people sell. Simple as that.

You can only sell if someone's willing to buy

Sure but if there wasn't a buy-side prices wouldn't be increasing.

It is nothing more than a greatly-timed opportunistic race to the finish. The same rush happened in August and September 2019 and right now they are at it again, before they lose out as they nearly did due to the virus and also towards other uncertain characteristics happening in 2020.

Yes, basically stocks are very high considering that economic collapse is a likelier possibility than it has been in a while. So companies that were trying to pick the right time to IPO are filing now to get that green in the bank before the market implodes.

If all of these companies are rushing in to get some of dumb money (probably not the correct phrase for this) floating around would it also mean these companies aren't worth investing in?

More like these are good companies that are ready to IPO and the window of opportunity closes if there is a crash. So go now or go in 2+ years?

Is it possible that few other industries feel like a good investment right now?

This is actually pretty normal, unless there has just been a crash:


If you start studying the capital markets you'll quickly learn just how little you've known about the economy before. Look at any object on your desk - know how was that thing made? Someone out there has manufactured the thing, there was a few if not a few dozen corporations involved.

None of these seem to be listed on that page yet.

Because filing the form S-1 comes quite a bit before the actual start of trading. S-1 is a prospectus, lets investors familiarize themselves with the offering.

I'd also add that this is just NASDAQ. There's a lot of other exchanges across the world.

Though, obviously, offerings in other (foreign) markets won't necessarily file S-1s because S-1 is a concept of the United States' Security and Exchange Commission (SEC).

Have you seen the stock markets recently? Apple has market cap of 2 Trillion dollars. Just a little piece of that will fuel a business's growth.

Trying to take advantage of all the capital available and momentum in the market. Same thing happened the couple years before the dotcom bust in 2000.

Trying to cash out before capital gains taxes rise?

Is more public companies a good thing or not?

Probably because tons of money can be taken off the table for all these over pumped companies in the stock market and plowed into the hot new things.

SPACs are playing a huge part too.

Pump and dump, imho.

I imagine trying to get them in before November 3rd

What's the importance of that date?

That date is Election Day in the U.S. 1/3 of the US Senate, the entire US House of Representatives, a slew of local and state races and ballot measures. Also, at the top of the ticket is the election of a new (or perhaps not) President.

This date has no bearing as most of these stocks will not be traded before November 3rd

What happens on Novdmber 3rd?

The United States presidential election is that day


Trump's capital gains tax policies that have deprived our government of vital revenue are increasingly likely to go away next year. Rich people have bribed the Republican party for decades to make it so that "investment" income is taxed at ~15% vs ~25% for the working person's hard earned income.

There's no revenue to tax if your high tax rate pushes all the businesses away

They should be hidden from the homepage. I stopped visiting TechCrunch a very long time ago when the majority of their posts became fundraising news.

No, whether something is on front page is not really affected by stock market (though HN algorithm is closed so it may actually be, but unlikely). The main reason is, someone shared link to S-1 and others upvoted it

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