Despite being burned by Snap and Blue Apron earlier this year, investors appear undeterred when it comes to tech IPOs. In their first day of trading, shares of Roku soared 68% to $23.50. The IPO was priced at $14 per share last night.
A big reason for the enthusiasm in the TV-streaming device maker is that there just aren’t a lot of tech IPOs these days. Between the availability of venture-capital funding and the hassles that come with being a public company in the spotlight, many tech companies are staying private for as long as possible.
Like Roku, Snap enjoyed a nice pop on its first day of trading in March. But the stock crossed below its IPO price in July and now trades below that level. Investors liked the idea of owning a piece of its growth story, but they became disappointed when that growth wasn’t happening fast enough. Blue Apron shares treaded water the day the stock went public but have lost about half of their value since.
Roku investors seem confident the company will break from the disappointing pattern. Roku sells streaming players that enable consumers to watch Netflix, Hulu, and more from their TVs, but it’s trying to become more than just a hardware company. It generated about 40% of its revenue in the first half of the year from “platform” businesses, like ad revenue and cuts of subscriptions purchased directly through its devices.
The public markets ultimately haven’t been so kind to hardware companies trying to turn into service-oriented businesses. Shares of Fitbit and GoPro have plunged since their IPOs as the companies attempted to become less reliant on device sales. Perhaps Roku will be a different story given that its “platform” business is more established at the time of the IPO.
Big Picture: Roku priced its IPO at $14 per share on Wednesday night. On Thursday — its first day of trading — the stock soared 68%.