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Can We Expect More Strength from the IPO Market in 2019?

Written by Monica Savaglia
Posted August 27, 2019

We’re all on the search for the next big (and best) thing. 

After all, who doesn’t enjoy being a part of something before anyone else knows about it? Especially when it’s on the path toward big success. 

That’s one of the biggest reasons investors are so intrigued by initial public offerings (IPOs). Knowing about a company before it goes public and before it soars has fascinated a lot of people. I know it’s fascinated me, and it still does. 

The chance to become an investor at the very beginning, when a company finally goes public and shows signs of major growth in its industry, doesn’t come around too often, but when it does, you have to trust your gut feelings because you could end up like one of those early investors in Apple (NASDAQ: AAPL) or Amazon (NASDAQ: AMZN) back when they first went public. 

It’s a story that never gets old. At least not for me. Apple and Amazon have become massive companies in a relatively short period of time. Well, not too short — a few decades. But Apple and Amazon’s successes aren’t the only success stories, and they won’t be the last, either. 

2019 Has Been a Big Year for IPOs

Last year, everyone was talking about how 2019 was going to be one of the biggest years for the IPO market. Well, people weren’t wrong, but 2019 didn’t quite start off with the bang that was expected thanks to the U.S. government shutdown that lasted a lot longer than it should have.

Once the SEC got back up and running, there was some hesitation, and companies that planned to go public were waiting for someone else to make the first move to “test the waters.”

I think what partially began this year’s IPO market was popular retail denim brand Levi Strauss (NYSE: LEVI). But it wasn’t until Lyft (NASDAQ: LYFT) went public that this year’s IPO wave really kicked off. Investors and the media have been watching Lyft and its competitor, Uber (NYSE: UBER), for a while, wondering when the companies will go public. 

When these companies went public earlier this year, both IPOs proved what most analysts were saying about them: that they were overvalued and not profitable. Both of these companies hoped that the hype surrounding their names and their valuations would be enough to attract investors.

However, investors weren’t fooled. That’s why both companies are trading below or near their IPO offer prices. Lyft's IPO offer price was $72, and as of open on Tuesday, August 27, shares were at $51.24 — a 28% decrease from four months ago. Uber's offer price was $45, and as of open on Tuesday, August 27, shares were at $33.69 — a 25% decrease from its May IPO date. 

Despite what happened with Lyft and Uber, we were still experiencing a robust IPO market as more tech companies were coming forward with their public debuts. They were actually showing their worth, and their offer prices reflected that worth. The 2019 IPO market so far has averaged over $2.4 billion in IPO proceeds, and year-to-date IPO proceeds are coming in close to $15 billion. 

PagerDuty (NYSE: PD) went public a little after Lyft in April, and it’s still up 45% from its offer price of $24 per share. PagerDuty is a technology company that offers enterprise software to help other companies manage their technology systems in the most effective way possible. PagerDuty is on the list of the most successful IPOs in 2019.

There is a huge market opportunity for companies like PagerDuty because a lot of companies use technology to help them with their core business. There are signs that the company is growing, and if that’s shown in its second-quarter fiscal year 2020 report on September 5, 2019, then we can see an increase in its stock as long as the stock market stays receptive to tech stocks. 

Another highly successful tech IPO came from CrowdStrike (NASDAQ: CRWD). CrowdStrike is a cybersecurity company that provides cloud-delivered endpoint protection. The company went public in June and offered a share price of $34 per share when it IPO’d. Now the company is trading at $89.28 as of open on August 27 — a 161% increase from its offer price. The company recently announced the launch of Falcon Fund, which is a $20 million early-stage investment fund started in partnership with Accel.

Could Cloudflare Help Maintain the IPO Momentum?

Things are about to pick back up again with the IPO market to hopefully end 2019 with a bang. Cloudflare, a cloud-based company that ensures websites operate smoothly on the internet, has filed for its initial public offering.

Cloudflare has been in the news lately not just because of its potential IPO but because the social media network of one of its customers, 8chan, has become a toxic environment, especially for internet trolls. However, the company has since dropped 8chan as a customer because of its audience for “domestic terrorists” and to assure investors that Cloudflare is taking control and eliminating its risk factors as best it can.

Like most tech startups, Cloudflare is losing money, but it’s not losing a lot of money or doing so quickly, which would be very bad sign for the company and investors. What the company has going for itself is its growth — Cloudflare has been impressively growing its revenue over the last few years.

Revenue increased from $84.8 million in 2016 to $134.9 million in 2017 and then to $192.7 million in 2018. However, expenses have also taken a big jump. In 2017, losses reported at $20.3 million increased to $85.2 million in 2018.

Cloudflare plans to raise $100 million from its IPO. Since its last funding round, the company's valuation is now near $3.1 billion. It’s still a good time for companies like Cloudflare to go public, especially as we approach the end of the year and before market volatility gets more uneasy.

Cloud companies are doing well, and I believe Cloudflare has used that as an incentive to go public. If companies like PagerDuty and CrowdStrike were able to have successful IPOs and still trade above their offer prices, it can’t be that bad for Cloudflare.

You have a chance to stay ahead on IPO news and never miss out on the “next big thing” by clicking here.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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