Public Markets Venture

Upwork Above-Range IPO Pricing, Pop Keeps The Good News Rolling For Unprofitable Cos

Today marks yet another strong march to the public markets for a company that doesn’t make money. Upwork, after initially pitching a $10 to $12 range, boosted those figures to $12 to $14 before pricing at $15 yesterday evening.

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The company’s equity quickly shot 50 percent higher or so, another high point for 2018’s lively IPO cohort.

The digitally-powered freelance shop is unprofitable. Indeed, it lost money in 2016, and in 2017, and in the first half of 2018 it lost money again.

That fact, however, is not a big deal to the public markets at the moment. As we’ve seen recently, more than 80 percent of 2018’s IPOs in the United States have featured unprofitable companies. And Upwork’s warm reception is in-keeping with what a number of other recent tech IPOs themselves received; no profits, no problem.

The standard argument against gaffers like myself who are chained to the lower slopes of GAAP is that these tech companies aren’t selling profitability, really. Instead, unprofitable tech companies are selling growth today, and profits later on. Surely once they grow a bit more Upwork and Eventbrite and SurveyMonkey can make some coin?

Perhaps, but let’s remind ourselves how quickly Upwork grew from the first half of 2017 to the first half of 2018: 27.6 percent while losing more money.

That figure is probably pretty ok, and in calmer markets, Upwork could probably still go public. But I doubt that if we were living in an age of an abundance of caution Upwork’s pricing dance would have been so salubrious.

But that makes Upwork’s decision to go public now all the more intelligent. Go out when you are welcome, and investors are willing to buy your shares at higher prices. You bank more money now for when you need it later.

Per CNBC, Upwork was worth $1.5 billion at its IPO price. If it holds onto its current gains, that figure should start with a 2 tomorrow.

Illustration Credit: Li Anne Dias

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