Looks like 2014 is turning into the year of the tech IPO in the U.S.

This story first appeared in the April 18, 2014 issue of WWD. Subscribe Today.

The public markets window is still open so far, and following the initial public offerings completed last year, such as Zulily and Twitter, expect more technology-related IPOs throughout 2014.

In the area of fashion and apparel, don’t expect these soon-to-be-newly listed firms to be pure tech plays, such as a Microsoft or Cisco of years past. Think more e-commerce and Web plays, such as Alibaba and Gilt Groupe.

To be sure, some recent IPOs have priced shares lower than expected, such as Sino Corp.’s Weibo Corp., which priced Wednesday night at $17 a share, giving the firm a valuation of $3.46 billion. It began Nasdaq trading Thursday under the symbol “WB.”

Weibo disclosed in a regulatory filing that its 20-million-share offering is likely to be priced between $17 and $19 each, raising $380 million and valuing the group at $3.9 billion, at the top range of its pricing guidance. Instead, the micro-blogging site in China that’s comparable to Twitter in the U.S. sold 16.8 million American depositary shares at the low end of its range and raised $285.6 million. Shares of Weibo opened at $16.27 and gained ground, rising 19.1 percent to close at $20.25 in its first day of trading Thursday.

Cloud-based human resources and payroll firm Paycom.com didn’t fare as well. On Tuesday, shares of Paycom priced at $15 a share, lower than the expected range of $18 to $20 a share. In its first day of trading Wednesday, shares of Paycom opened at $17.90, but then drifted lower to close at $15.62.

Last month the entertainment mobile app Candy Crush went public, only to see its stock price fall nearly 16 percent below its IPO pricing on the first day of trading. That could suggest either a possible caution in the tech IPO market or something more specific to gaming IPOs. Social gaming firm Zynga, which was valued in its December 2011 IPO at $7 billion, saw shares climbing as high as $11.50 in its first day of trading. The shares currently trade around $4.50 each.

Much of the decline in the equity markets lately has centered on biotechnology and tech firms, leaving some to question whether there’s been a bubble in the tech sector.

David Freschman, founder and chief executive officer of both early-stage venture capital firm Early Stage East and fashion networking group FashInvest, said while the current market “has the feel of a bubble, what’s tempering it a little is that start-ups in order to get Series A and B fund-raising rounds now have to be more mature before they go public,” compared with the technology boom and bust of 1999 and 2000.

In addition, what may keep tech IPOs at the forefront is the trend this year of a number of Chinese firms listing outside their home country. The Asia-Pacific region last year was impacted by a shutdown of China’s A-share IPO market as the country put a hold on equity offerings to redo the regulatory framework for stock market listings. That ban was recently lifted, but the regulatory structure — in terms of requirements — is considered more stringent than the U.S. For example, China limits the daily gains and losses on stock prices.

Financial sources said many of China’s regulatory rules are pushing Chinese firms to consider listing in the U.S.

Another Chinese firm that priced recently in the U.S. is Jumei International Holding Ltd., which said it plans to raise around $400 million in an IPO.

Jumei.com is a Beijing-based e-commerce cosmetics firm that also operates a flash-sale site. The filing didn’t state when it plans to go public — although some in the investment community believe it is likely in the second half of this year — or on which exchange it plans to list. Jumei is backed by venture capital firm Sequoia Capital. The company, which said in the filing it posted $8.1 million in profits in 2012, more than tripled that to $25 million in 2013. The filing also said it had 10.5 million active customers.

Next up could be the Alibaba Group, China’s Internet giant, which has said it plans to list in New York. The company, which owns a stake in Weibo, is expected to list later this year, and speculation is that the online firm could raise as much as $15 billion in an IPO that would value the company at more than $100 billion. The company could file its shelf registration next week.

Also planning to go public in the U.S., possibly by July, is JD.com Inc., a Chinese e-commerce site that’s considered second to Alibaba. The company filed a shelf registration in January in which it said it hoped to raise $1.5 billion. Asia’s largest Internet firm Tencent Holdings Ltd., which operates the WeChat message service, has a 15 percent stake in JD.com.

According to a report from IPO investment advisory firm Renaissance Capital, the U.S. IPO market in the first quarter showed more activity than in any other first quarter since 2000. That’s based on 64 firms raising $10.6 billion, or more than double the number of IPOs in the same year-ago quarter. While health-care firms dominated the quarter, the advisory firm said the technology sector picked up in March as investors embraced companies offering cloud and enterprise software. Renaissance also concluded that with 103 new filings in the quarter, the “rest of 2014 is on track to keep up this record pace.”

The latest in the fashion space to go public on March 21 was Borderfree, a logistics service that facilitates cross-border e-commerce activity between U.S. retailers and international shoppers in more than 100 countries and territories.

Other e-commerce plays from non-Chinese firms that could go public this year include Gilt Groupe and the much-speculated Etsy. In addition to Gilt and Etsy, research firm CB Insights had Warby Parker on its list of potential tech IPOs for this year. There are 590 technology firms on CB’s list, all of which are backed by either venture capital or private equity financing.

Tech firms that are considered possible candidates for IPOs tend to be ones that make certain changes to their management team, such as an experienced chief financial officer; are getting close to or have surpassed $100 million in annual volume, or have been able to raise a significant amount in their latest fund-raising round.

Warby Parker in December raised $60 million in a Series C round of financing; Etsy in February 2013 brought in Fidelity veteran Kristina Salen as cfo, and Gilt is said to have hired Goldman Sachs to work on an IPO for later this year. Pinterest, which raised $225 million in Series E funding in October that gave it a company valuation of $3.8 billion, doesn’t currently have any revenues. Pinterest is, however, getting into the paid advertising revenue model, a move that could impact whether an IPO is even a possibility down the road.

Tech IPOs last year included digital coupon firm RetailMeNot, raising $191 million in July; children’s merchandise e-commerce site Zulily, raising $253 million in November, and social media site Twitter, raising $1.82 billion in November.

The Twitter raise was intriguing, given that — according to its shelf registration last year — while revenues jumped nearly threefold in 2012 to $316.9 million, the company has yet to figure out the profit side of its business. It logged adjusted earnings before interest, taxes, depreciation and amortization of $21.2 million for 2012.

While subscribing investors received the benefit of the offer price of $26 a share, anyone who bought — and held — on the first day of trading when it opened at $45.10 on Nov. 7, or when it hit a high of $50.09 in intraday trading, ended up losing money at the day’s close at $44.90. Shares of Twitter are in the trading range of $41.

Freschman expects technology IPOs to continue at a fever pace this year.

“The cash sitting on the sidelines is huge, and it needs to be deployed in some type of investment. You can’t leave it in the bank earning a quarter of a point.…Technology has become more capital-efficient, and the venture capital firms focused heavily on technology and enterprise software have to exit now so they’re pushing the IPOs out. The valuations are going up, even if you wonder how, in some cases, a company of 30 people is worth $19 billion,” the venture capitalist said.

In the same CB Insights report, the question was raised whether valuations in the tech IPO sector are hitting bubble territory, noting that “[w]ith massive financing and secondary market rounds becoming more frequent, so have billion-dollar-plus valuations. The number of tech IPO pipeline companies that raised financing with a real or rumored valuation of $1 billion-plus in 2013 jumped 67 percent versus 2012.” Among those on its list having real or rumored valuations of $1 billion or more include online sports retailer Fanatics, Gilt, Pinterest and global youth digital media firm Vice.

According to Freschman, the values being assessed by the venture capital industry are not always reflective of what institutional investors might think appropriate for a company. “What happens is that some companies go public and accelerate in value and others will see values reduced so they’re more aligned with traditional metrics based on cash flow and future dividend earnings flow. At some point you’ve got to value a company based on earnings,” he said.

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