Software companies see combined growth by almost $3 trillion thanks to Covid

The combined market cap of listed software companies grew by almost $3trillion thanks to the Covid-19 pandemic.

Back at the end of 2019, the total value of the world’s listed software companies was a mere $4.7 trillion US dollars, barely enough money to send a busload of tourists to Mars and back. A year on and the value of software companies listed on the stock market is USD 7.5 trillion, up 59 per cent. That’s an increase of $2.8 trillion.

Talking of travelling to Mars, you don’t need a degree in rocket science to figure out why.  Remote working has lead to increased use of software; unless you have been living on Mars over the last year, you probably guessed that.

Investment bank GCA Altium, which did all the sums that drew the answer of $2.8 trillion, said: “This growth has been driven by businesses in the SaaS space.”

Zoom, Adobe and Splunk led the charge. Quelle surprise, Zoom shares have done quite well since December 2019, up roughly five-fold. The company is now worth $100 billion. The Adobe share price is up two thirds to $220 billion — actually, Adobe saw a stellar performer during the last decade, and shares are up 20-fold since 2011. These two firms have grown by $150 million or so between them, but GCA Altium calculates that the entire SaaS sub-sector collectively increased by one trillion dollars. Platform-based companies including Oracle, Microsoft, IBM and Cisco increased by just shy of half a trillion dollars and enterprise “resource planning and business technology firms including Slack, Salesforce and Shopify” put on just under a quarter of a trillion.

GCA Altium said: “Infrastructure tech, which includes businesses such as Citrix and Fastly, saw a 212 per cent rise in value from USD 98bn in Q4 2019 to USD 208bn in Q4 2020, followed by business intelligence and analytics (168 per cent) and sales and marketing (152 per cent).”

M&A activity was also strong among software companies, with, for example,

• Salesforce’s USD 28.4bn acquisition of Slack
• Thoma Bravo’s 10.2bn purchase of RealPage
• Intercontinental Exchange’s 11bn purchase of Ellie Mae
• And Mastercard is forking out $15m short of a billion dollars for Finicity.

Adrian Reed, Managing Director at GCA Altium, said: “Given the growing ubiquity of digital technologies, and the strong recurring revenues seen by software companies, it is unsurprising that investors have become increasingly interested in the sector over the last 12 months. Despite the understandable caution caused by the pandemic, we have seen record levels of activity, which we expect to continue into 2021.”

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