Public Software/SaaS/Internet Company Stock Performance

This excerpt is from our complimentary Q2 2012 Software Industry Financial Report which can be downloaded here:

Following strong growth and solid returns in the first quarter, each of the major stock indices retreated sharply by the close of the second quarter, but managed to hold onto positive yearto- date returns. The tech heavy NASDAQ index finished Q2 with a total YTD return of 12.7%, 5.9% lower than at the close of Q1. The S&P 500 and DOW lagged behind, ending Q2 with YTD returns of 8.3% and 5.4%, respectively (Figure 3).

Among SEG’s three tracking indices, the market performance of public companies comprising our SaaS Index far outshone their perpetual software and Internet counterparts. Thanks to accelerating growth, heightened M&A activity and stellar exit multiples (see M&A section for details), the stock prices of public SaaS companies posted a median 28.2% year-to-date return by the close of Q2, after surging 22.0% in June. Five superstars posted YTD stock returns in excess of 50%: Ellie Mae (218.6%), Athenahealth (61.2%), Ariba (59.4%), LivePerson (51.9%) and Bazaarvoice (51.7%). Ariba’s return was driven by the 19.6% premium paid by SAP when acquiring the Company in May 2012.

After posting a 22.4% median stock return in the first quarter, the highest among our three tracking indices, the SEG Internet Index closed Q2 with the lowest YTD stock return, 4.3%. The sharp drop was primarily attributable to renewed economic fears, faltering on-line consumer spending, and Facebook’s IPO debacle which adversely impacted an array of high risk, highly valued Internet stocks.

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