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Twilio looks to brave Brexit jitters with U.S. IPO

[June 22, 2016] By Lauren Hirsch

(Reuters) - Communications software provider Twilio Inc is expected to price its $140 million U.S. initial public offering on Wednesday, a rare technology stock market debut, one day before Britain holds a referendum on its European Union membership.

Twilio's software is used by large companies such as car-hailing service Uber [UBER.UL] to allow drivers to speak and text with passengers without exchanging contact information.

IPOs are susceptible to wild market swings as investors struggle to value new shares, and the U.S. stock market has been particularly volatile ahead of the so-called Brexit vote on Thursday.

Anxiousness over the vote has contributed to jolts in the Market Volatility Index, which measures investor nervousness. Last Monday, the index jumped 23 percent.

Last week, event technology provider PSAV Inc postponed its U.S. IPO, citing unfavorable equity market conditions. Food manufacturer and supplier AdvancePierre Foods Inc [OAKAP.UL] changed its plan to go public this week, according to a source familiar with the matter, who asked not to be named because the IPO timing had not been made public.

AdvancePierre could not be immediately reached for comment.

Still, sources familiar with Twilio's IPO said it received warm welcome from investors last week. San Francisco-based Twilio, whose business is mainly in the United States, is not likely to be affected if Britain leaves the EU.

Moreover, mutual fund manager T. Rowe Price Group Inc, a late-stage investor in Twilio, has publicly expressed an interest in buying 15 percent of Twilio's IPO. While the offer is not binding, such an endorsement could boost Twilio's appeal with other investors.

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"In a market like this, if you put that on the cover from the get-go, it's a bullish signal," Kristin DeClark, head of technology equity capital markets at Deutsche Bank, said, without specifically referring to Twilio.

Such insider participation is not uncommon. Of the last 25 U.S. technology debuts, eight had pre-IPO investors either on the IPO cover or buying in a private placement.

Twilio is pricing itself conservatively, market sources said. While not profitable, it has won favor touting a fast-growing business model that does not require marketing spend to boost revenue. The IPO also follows a string of high-profile and large technology acquisitions, that have boosted corporate valuations in the sector. "It doesn't look like the company fundamentals will be hit by some of the macro-events, because it's riding on a wave of new technology," said Kathleen Smith, principal at Renaissance Capital LLC, which manages IPO-focused exchange-traded funds.

A successful market debut by Twilio may help stimulate the 2016 U.S. technology IPO market. Such IPOs have raised a total of $322 million so far this year, down 90 percent from $3.35 billion over the same period last year, according to Thomson Reuters data.

(Reporting by Lauren Hirsch; Editing by Richard Chang)

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