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Welcome back! The market for initial public offerings has thawed a bit so far this year. But don’t forget about deals going the other way—software companies going private again, relatively soon after their IPOs. Bankers say they are talking to software companies that have struggled since their IPOs about going private again. Some of these boomerang stocks will be leaving the market for the second time. The biggest such take-private so far this year is Turn/River Capital’s $4.4 billion cash acquisition of IT software provider SolarWinds, completed in April. That was SolarWinds’ second public-private go-around: It first went public in 2009, and Thoma Bravo and Silver Lake took it private in 2016. Then, 32 months later, it went public again. Right before Turn/River announced the deal in February, SolarWinds shares were trading down 44% below their 2018 IPO price, thanks in part to the lingering impact of a big 2020 cyberattack. Matthew Amico, a partner at Turn/River, said taking SolarWinds private will help the company move past the year-old cyberattack and focus on growing its artificial intelligence tools. Similarly, a SolarWinds spokesperson said going private allowed it to focus on product innovation and gave it flexibility to invest in AI. The cyberattack that hobbled SolarWinds’ stock price is a bit of an anomaly, but the company is not alone in facing such a setback. Shares of many other software makers are down over the past five years simply because they went public when valuations were particularly frothy. The most likely take-private candidates from the IPO classes of 2020 and 2021 are those with weak share prices and a decent amount of sticky revenue. Shares in Integral Ad Science, which was majority owned by Vista Equity Partners when it went public in 2021, are down 15% year to date and are trading more than 50% below the company’s IPO price. Shares of Vivid Seats, a StubHub competitor that went public via a special purpose acquisition company deal in 2021, have dropped 50% so far this year. Both companies have had modest but steady growth since they went public. Both Vivid and IAS had reportedly been exploring sales as of late last year, sounding out potential buyers including private equity firms. Vista declined to comment. Vivid and IAS didn’t respond to requests for comments. Other public companies to watch include Apple device management firm Jamf, which Vista Equity Partners had a majority stake in before taking it public in 2020. Its shares are trading nearly 65% below their IPO price and have dropped 35% year to date. And shares in financial software provider MeridianLink, which went public in 2021, three years after Thoma Bravo bought it, recently hit a 52-week low. Thoma Bravo declined to comment. Shari Mager, deal advisory partner at KPMG, said the market has seen many IPOs in the 2020 and 2021 boom that have not performed as well as expected. “It’s common that they contemplate if take-private would be the right answer to take that declining stock price off the table and then refocus on the business, economics and fundamentals to go public again when things are more stable,” said Mager. There has been one notable instance this year where a private company pulled off a fresh IPO. SailPoint went public in February, some three years after Thoma Bravo took it private. SailPoint is a classic boomerang stock; Thoma Bravo originally took the company public in 2017. There are still take-private candidates leftover from the 2020 and 2021 IPO boom. The IPO drought that followed means fewer recently listed companies are candidates to be taken private. Prospects for private equity software IPOs remain hazy. Silver Lake and P2 Capital Partners are reportedly exploring an IPO or sale of payment firm Blackhawk Network. Silver Lake and Blackhawk declined to comment. Vista-backed automotive data provider Solera filed publicly for an IPO in 2024 and never wound up moving forward. It would likely take some time for recent IPOs of firms backed by private equity to stabilize in market valuation and become attractive to private equity buyers again, according to Eric Mandl, senior managing director at Guggenheim Securities. A corporate buyer is more likely to make a move once they get a chance to see how a potential acquisition target trades on public markets. “Now what could happen is you take a business public, and through unforeseen forces it trades down to levels where a strategic says: I thought I’d have to pay a certain price for this business, and maybe now I can get it for a discount,” said Mandl.
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