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Wall Street Beat: GoPro continues to soar after IPO as Nasdaq surges

Wall Street Beat: GoPro continues to soar after IPO as Nasdaq surges

IPO, stock market and M&A activity point to confidence in tech sector

Shares of action-camera maker GoPro shot up again Friday, a day after its IPO, riding on the rise of tech stocks and continuing confidence in IT.

GoPro shares jumped 30 percent from its opening price Thursday on the Nasdaq, and ascended by another 14 percent (US$4.56) to close at $35.90 Friday. The share price rose so quickly that it left some market watchers criticizing GoPro's executives as leaving money on the table -- meaning, they should have raised the IPO price to take in as much cash as possible.

But GoPro played it smart, said John Fitzgibbon, who runs the IPOScoop.com website. "If a company sets the price too high they run the risk of litigation when they get hit with a class-action suit when the share price goes down," Fitzgibbon said. "I've been hearing about companies 'leaving money on the table' for years, but you also have to remember that the price is set in negotiations between the company and the bankers; you try to reach a happy medium, where the price seems like a pretty fair value and also gives returns for shareholders."

But the bigger picture is that GoPro's success is yet another sign that things are bubbling along nicely for tech, despite the fact that actual sales results for major vendors this year have been mixed.

The tech-heavy Nasdaq is creeping up toward its high point, reached in early 2000 just before the dot-com crash. It closed Friday up by 18.88 points at 4,397.93, its highest point since the spring of 2000.

But things are different now, Fitzgibbon said. "You have a different IPO market -- you don't have a hot, frothy stock market underneath it," Fitgibbon said. It's taken 14 years for the Nasdaq to get back to the 4000-plus range, and though the Nasdaq Computer Index is up 39 percent year over year, it's been strong but relatively stable since the start of the year -- up 9 percent since Jan. 1. That's one reason why there have been more IPOs in tech in the last 12 months than for any other sector except for health care.

The IPO train is not expected to stop anytime soon, analysts said.

"As long as IPOs continue to generate positive returns, we expect IPO issuance to remain active for the remainder of 2014," reads a report issued Friday by Renaissance Capital. "An increasing number of global companies are announcing their intentions to pursue an IPO. Notable companies in our Global IPO Pipeline that we expect to list in 2014 include China's largest e-commerce firm Alibaba Group."

Underlying the strong market for tech stocks and IPOs is an apparent confidence on the part of industry insiders that IT provides a competitive advantage and that overall, the economy is stable enough to warrant an increase in tech spending budgets.

"CIOs now have higher conviction in budgets versus three months ago and spending mindset remains biased towards investing for growth rather than cost cutting," reads a CIO survey released this week by Morgan Stanley. "Purchases decision cycles also shortened in the past three months, which we view as an encouraging sign."

The strong stock market and underlying confidence in the sector is also boosting tech mergers and acquisitions. The value of all tech mergers and acquisitions deals whose values were disclosed in the first quarter worldwide was $66.6 billion, up 83 percent year over year and the highest level since -- once again -- 2000, according to a recent report from EY (formerly Ernst & Young).

Tech vendors are trying to position themselves to take advantage, among other things, of the move to mobile and cloud technology by consumers and businesses, which is fueling a lot of the excitement about tech these days. In light of a stable stock market, which helps the process of calculating a fair value for acquisition targets, and enthusiasm for new technology, vendors having been going on a spending spree.

A case in point: Oracle's announcement this week of its pending acquisition of retail and hospitality technology vendor Micros, its biggest acquisition since buying Sun Microsystems in 2010.


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