By the end of the first day of trading, the valuation had increased by 30%.  Since the IPO, the price has fluctuated but appears to have steadied around the $41-43 mark. 

Another large tech business showing good growth since IPO has been Tuniu, the leading online leisure travel company in China.  Since going public on 9 May 2014 with a share price of just over $10.00, it has seen a growth of over 125% in the three subsequent months ($22.61 as at 19 August). 

As well as bucking the current trend this year of digital businesses seeing a steady drop in their share price following listing (see for comparison, Pets at Home, Boohoo and AO World), Go Pro and Tuniu appear to be bucking a larger trend.  When Alibaba finally goes public this year, it could raise over $20 billion making it the largest IPO ever in the US, topping Visa's $19.65 billion IPO in 2008.  That would probably value Alibaba at somewhere between $150-$200 billion.  By comparison, the listing valuations of GoPro and Tuniu ($3 billion and $0.5 billion respectively) seem small beer.  Indeed, it would seem these businesses are outliers. 

The latest report on venture capital funding in the tech sector from CB Insights, revealed that the second quarter of 2014 has seen more than US$13 billion of venture investments - the largest figure for any one quarter since the height of the dot.com boom in 2001.  This is part of an upwards trend - nearly US$24 billion has been invested in VC deals during the first half of the year, 71% better than the first six months of 2013.   Digging into the numbers, though, it becomes clear that this is not due to a wider spread of investments, but increasingly large late-stage funding into mature businesses.  Uber raised $1.2 billion in 2014, on top of the $361 million it received from investors the year before.  Airbnb took in a further $475 million of investment, in addition to the $200 million raised in 2012.

Commentators believe this growth of late-stage investment is due partly to the relaxation of certain restrictions on private companies to continue to raise finance in the US JOBS (Jumpstart Our Business Startups) Act, but also in making sure mature businesses have sufficient funds to enable a successful floatation. 

In a recent interview, Marc Andressen - co-founder of Netscape - argued that heavy regulation means a company wishing to go public has to prepare itself for a much higher level of scrutiny than it would have done a decade ago:

"...that all started to change after 2000.  A whole set of "closing the barn door after the horse had run out" kind of things happened... The irony of Sarbanes-Oxley was that it was intended to prevent more Enrons and Worldcoms but it ended up being a gigantic tax on small companies". 

Any business looking to list on the London Stock Exchange faces similar regulation.  Both the Listing Rules and the Disclosure Rules and Transparency Rules of the Financial Conduct Authority impose obligations on companies following an IPO, particularly in respect of corporate governance and the disclosure and dissemination of information, which private companies do not need to comply with.   

Listed entities need to ensure that any inside information relating to the business is tightly controlled and disclosed to the market fairly.  With a group of individual shareholders, this makes sense: no shareholder should be given information which another doesn't have which could put the shareholder with knowledge at an advantage in the market.  However, the nature of the shareholder base in listed companies has changed dramatically over the last ten years.  Now, listed companies may increasingly find their shares in the hands of investors involved in short-selling: essentially, betting against the rise of the company's share price.  Having to square away disclosure obligations when potentially dealing with unscrupulous shareholders can be very difficult, according to Andressen:

"The shorts will just make stuff up," said Andressen, "So then you're the company, and you're dealing with these crazy rumours and all this crazy activity every day.... Normally, someone would call you up, [ask if the rumour were true] and you'd say no.  But under [the disclosure regulations] you can't do that.  So the running joke is what you need to start putting out a daily fact sheet saying here's all the things that are said about us that's not true".   

Dealing with such issues involves costs that only large mature businesses can handle.  When Netscape listed in 1995, it did so on a valuation of US$2 billion.  Seventeen years later, Facebook was worth more than 50 times that amount when it went public.  Alibaba is just the latest in a long line of IPOs, where the company may have matured outside the public market.    

  By Andy Moseby Corporate Partner at Kemp Little