The IPO market is drawing interest —and DFW is 'ripe' for more – Dallas Business Journal – Dallas Business Journal






AgileThought CEO Manuel Senderos was looking to hold an initial public offering for his tech company, but the challenges around COVID-19 changed the timing. Now, the local firm is set to join the Nasdaq via the now popular method of using a SPAC (special purpose acquisition company).
The move — which involves merging with the existing public company — is set to wrap up in the third quarter and can help AgileThought expand as it uses acquisitions, Senderos said. It’s also about charting its own course.
“We really think we’ve got something special here, and we want to keep it as a standalone company,” Senderos said. “We think being public really helps us in that endeavor — to become a large, standalone technology company rather than potentially being acquired as a private company.”
AgileThought, which provides services around software development, is yet another example of a Dallas-area company moving to the public markets in 2021. The region is gaining momentum with efforts to joining the Nasdaq and the New York Stock Exchange as executives look to benefit from surging interest.
A recovering economy after the pandemic has helped turn attention toward the public markets — and that could continue, observers say.
“Strong IPO valuations has encouraged issuers, and strong early returns has furthered the willingness of investors to keep coming back for more,” David Ethridge, PwC’s U.S. IPO services leader, said in an email. “Absent an exogenous event that creates significant uncertainty, these factors will likely continue to drive filings and pricing through year end.”
The global market saw 727 IPOs in the first quarter of 2021, according to PwC. That’s more than 50 percent of the full year’s total in 2020.
North Texas has seen about 11 IPOs so far this year – already the same amount for all of 2020, according to data by PwC. There were two in 2019 and four in 2018.
“The Dallas-(Fort) Worth metroplex has benefited from general market trends,” Ethridge said. “We’ve seen a steady increase in the number of traditional IPOs, new SPAC formations, and SPAC merger transactions since the boom began in the latter half of 2020. Given the bullish trends across multiple sectors, and the overall diversity of the DFW business landscape, it makes the area ripe for continued opportunities in this robust environment.”
Instil Bio, a Dallas biopharmaceutical company, began publicly trading in March with an IPO and now has a market valuation of more than $2 billion. Plano’s Vine Energy, a natural gas company, also went out in March. Alkami Technology, a Plano fintech, started trading in April and has a market valuation of more than $2 billion.
And IPOs are more than just an event for the companies themselves. They can help local economies expand — and better prepare for the future.
“It’s absolutely a great thing,” said R. Greg Bell, professor of management at the University of Dallas.
There is a positive spillover effect on local economies in which a company is headquartered, according to a posting at Rice University’s website that refers to research by Alexander Butler and others that Bell referred to in the interview. Areas close to the corporate hubs see certain home prices and consumer spending rise, while new businesses and jobs are created, it said.
There can be a continuing benefit to a local area, including keeping more talent here when they graduate from local universities, Sriram Villupuram, associate professor, finance and real estate, at the University of Texas at Arlington.
“It’s a momentum effect,” Villupuram said. “People with more capital will open shops here to keep looking for these local innovators and entrepreneurs.”
A key driver in the recent activity is the growing number of SPACs, with business names that include “acquisition” in titles in recent months, stretching back into last year.
While not a new tool, these efforts produce public companies that then go looking for actual operational companies. When a deal is made and the merger is subsequently completed, that actual operating firm becomes public.
So, while a SPAC is an IPO with a physical address, the actual business can be located elsewhere with the completion of a merger.
Take Switchback II, a North Texas SPAC that raised more than $300 million in an IPO earlier this year.
Last week, California-based Bird, the scooter company, said it had a deal with Switchback II to go public. The transaction is expected to close in the third quarter.
On the other hand, there are Dallas-area companies set to go public via SPACs as well.
AgileThought is one of those — and it plans to combine with a SPAC that is based in Mexico (LIV Capital Acquisition Corp.). In March, Apex Clearing Holdings LLC, a Dallas fintech, and Northern Star Investment Corp. II, a publicly traded SPAC, announced a merger agreement that’s set to put the combined entity on the New York Stock Exchange.
And then there’s Katapult, a tech company that recently relocated its headquarters from New York to Plano. In December, there was an announcement that it would become a publicly traded company through a merger with FinServ Acquisition Corp., a SPAC.
Why the interest for entrepreneurs in IPOs? Bell pointed to it being a “function of coming out of COVID that a lot of companies are ready to go out.” He also noted that Texas is benefitting from a business-friendly environment.
At the same time, folks are putting more focus on public markets and IPOs as a good alternative, given low interest rates, Villupuram said.
“A lot of founders and others are seeing this — or private equity firms who have invested a lot … as an opportunity … a good time to sell more equity to expand,” Villupuram said.
As for AgileThought’s Senderos, he is looking to have his company go public in the third quarter. And he likes the way the SPAC can help him get to the Nasdaq.
“We were able to strike a deal with a SPAC that we thought was fair for us and gave us certainty of execution into going public,” he said. “The IPO — sometimes it’s a bit uncertain that you can actually achieve it.”
The company has found traction by helping clients with software development while tapping into talent that’s in the Americas, including in Mexico. That means AgileThought’s employees can work with clients — without being in a time zone on that’s roughly on other side of the globe.
AgileThought, which has more than 2,500 employees, hopes to expand beyond the management offices — and get a new location that will include developers. That could have around 200 employees at some point.
The company has done more than 10 acquisitions, and he looks forward to being public to tackle potential deal in the future, noting it will help give him for flexibility to make such deals.
“Technology is evolving all the time,” he said. It’s a “critical part of our strategy to continue to acquire — not huge acquisitions, what we call tuck-in acquisitions, smaller ones.”
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