UPDATED 23:36 EDT / JUNE 29 2017

CLOUD

A tale of two enterprise IPOs: Is the market moving ahead or falling back?

After a fairly strong run of initial public offerings by enterprise tech companies this year, suddenly new headwinds are starting to slow them down — but they haven’t stopped them yet.

The murky picture for tech offerings, especially those selling into data centers and information technology departments, emerged Thursday as various reports indicated cloud security startup Zscaler Inc. is inching toward an IPO, but also said cloud storage firm Trinti Inc. has delayed its IPO.

Despite some strong offerings earlier this year from MuleSoft Inc. and Okta Inc., some IPOs have faced tougher receptions. In particular, some consumer-oriented IPOs such as Snap Inc.’s have disappointed investors. On Thursday, in fact, meal-kit delivery service Blue Apron Inc. went public and its shares closed not a penny above its $10 offering price. Yet the next day, real estate firm Redfin filed for an IPO.

So far, enterprise technology companies have fared generally better, but even their status remains in doubt as they’ve slowed down considerably in the past two months, even as venture capital investment has slowed.

What’s more, not all the companies making offerings recently have fared well. Cloudera Inc., for instance, saw disappointing post-IPO earnings tank its shares even after it had set an IPO price far lower than the private valuation it had commanded. And yet, Dropbox Inc. is apparently looking to hire IPO underwriters, according to a report Saturday from Reuters.

So despite the uncertainties, companies are continuing to give it a shot. The New York Times quoted “people familiar with the matter” claim that San Jose, California-based Zscaler is interviewing investment bankers to choose as underwriters for the offering, which will value the company as about $2 billion.

Founded in 2008, Zscaler offers a cloud security platform that works in the background to provide security, operating in data centers to enable organizations to leverage cloud and mobile computing with protection. Coming into its IPO, Zscaler has raised $248 million over four rounds from investors including CapitalG, EMC, Lightspeed Venture Partners and TPG Growth.

By contrast, cloud storage startup Tintri Inc. unexpectedly delayed its IPO, set for today, while at the same time cutting its offering price. The Mountain View, California-based company was due to float on a price guidance of $10.50 and $12.50 but has now revised that down to $7 to $8, and also has cut the number of shares on offer from 8.7 million share to 8.5 million shares. That would reduce the amount it would raise to $68 million from an initial $109 million.

In any case, the company didn’t say when the IPO would happen. Some observers are now wondering whether Tintri’s IPO will actually proceed. The mere fact that the price guidance on the IPO has be cut would seem to indicate that the company hasn’t been able to attract interest from institutional investors. It’s also possible it might be angling toward an acquisition instead, but cutting the IPO price might undermine that.

Like Zscaler, Tintri has had a decent amount of venture capital coming into a potential float, having raised $260 million over five rounds. Investors include Akkadian Ventures, EquityZen, Insight Venture Partners, Lightspeed Venture Partners, Menlo Ventures, New Enterprise Associates, SharesPost Investment Management and Silver Lake Kraftwerk.

Whether Tintri’s problems are representative of overall trouble in IPOs or it’s simply an overcapitalized company with investors desperately looking for an exit at any price isn’t clear at this stage. Still, if Tintri’s apparent problems in corraling institutional investors are repeated in other planned IPOs, it may be a bad sign for future prospects.

Image: Marty B/Flickr

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