This past year, 2018, was one of the strongest initial public offering (IPO) markets since 2014. That strength could continue into 2019. It even has the potential to become an even bigger record-breaking year than 2018.
There were 136 IPOs priced at the beginning of 2018. And those 136 IPOs were able to raise $37.72 billion.
One huge factor of 2018's increase is that the IPOs that debuted this year were valued higher and had bigger deal sizes. The average deal size for IPOs at the beginning of 2018 was $277.4 million. That's up by 24% from 2017's average deal size of $224.1 million.
Larger IPOs means more cash earned, which makes sense about why 2018 has been a huge year for the IPO market. To continue the trend of a strong year for IPOs, the market will need some high-valued private companies to step up.
And they are: 2019 could be the year of the "decacorn" IPO. What does that mean? A decacorn is a term that's used for companies that are valued over $10 billion. Those companies that have been waiting around for the right time to go public are ready to take the plunge...
2019 Will Continue the Trend
We're about to see IPOs in some of the hottest industries right now. Industries like food delivery, ride-sharing, cybersecurity, and digital health. Last year paved the way for a lot of these industries, especially with the success of IPOs from companies like Tilray (NASDAQ: TLRY), Zscaler (NASDAQ: ZS), Eventbrite (NYSE: EB), and DocuSign (NASDAQ: DOCU), to name a few.
Going public is a great way for a company to market itself. In 2019, we expect to see companies IPO that are well-funded, well-regarded, mature (at least a decade old), and are household names. This will help create more success stories for 2019, not to mention high returns for 2019 IPOs.
The list of expected companies preparing to go public is impressive. And you may be familiar with these companies in some way or another. In 2019, we expect the following companies to IPO: Uber, Pinterest, Airbnb, Robinhood, Palantir, Slack, DoorDash, CrowdStrike, GRAIL, WeWork, and Postmates.
These are high-valued companies that have been operating and growing their businesses for at least the last decade. Going public as a startup is considered a right of passage. It's inevitable and one of the most obvious goals for a private company.
Let's take a look at some of these companies' valuations:
- Uber: $100 billion
- Pinterest: $12 billion
- Airbnb: $38 billion
- Robinhood: $5 billion
- Palantir: $20 billion
- Slack: $7 billion
- DoorDash: $7 billion
- CrowdStrike: $3 billion
- GRAIL: $3 billion
- WeWork: $3 billion
- Postmates: $1 billion
These companies are valued in the billions of dollars right now. So, imagine the possibilities when they go public…
I want to take a closer look at Uber, Pinterest, and Airbnb. These three companies have crafted themselves into household names and have a lot to gain when they go public...
Uber Technologies is a ride-hailing company that gives users the ability to hail a ride in the company's app when in need of transportation.
It's aims to go public in the second half of 2019. With a slow start to 2019, Uber was able to take the first quarter of 2019 and make sure that it had everything in line with its business in terms of financials and growth potential.
Uber is seeking to sell $10 billion worth of stock for its IPO. Uber’s offering has the ability to make it one of the biggest technology IPO in history -- surpassing Chinese e-commerce, Alibaba Group Holding’s offering back in 2014. Alibaba’s IPO raised $21.8 billion. With Uber’s offering, the company is aiming for a valuation between $90 billion and $100 billion. Uber was recently valued at $76 billion in the private fundraising market, but now, investment bankers are saying that the company could be worth as much as $120 billion.
Last year, Uber reported a revenue of $11.3 billion -- 42% up from the previous year. The company also reported its gross bookings from rides at $50 billion. Despite growth in those areas, the company has lost $3.3 billion. In 2017, Uber’s lost $4.5 million. What’s important to recognize with Uber is if its losses are shrinking, and if it could be on a path of profitability in the future.
As of right now, Uber operates in more than 70 countries. The company wants to expand its other areas of business, like food delivery, scooters, bikes, and freight hauling. Ride-hailing accounted for less than 50% of Uber's overall business, which means that its other areas are growing. These other areas are growing and will continue to contribute to Uber's overall business.
The company made a recent $3.1 billion acquisition of ride-hailing company, Careem. Careem is based in Dubai that has operations in over 100 cities and 14 countries in the Middle East, Africa, and South Asia. This was a smart acquisition for Uber, especially when it comes to showing investors and potential investors that the company is serious about moving forward in transportation at a global level.
It’s ride-hailing competitor, Lyft, went public on March 29. While Lyft is much smaller when compared to Uber, it didn’t act like a smaller competitor when it was public. It priced its IPO at $72 per share and raised about $2.3 billion in its offering, which brings the company to a $24 billion valuation.
Lyft had a first day of trading with a 30% increase throughout its first day of trading. However, as its first week of trading went on shares lowered and could continue to lower. The IPO dust needs to settle with this one especially because of the hype and the skepticism of the company being profitable and having realistic plans for future growth. Those two things are what attracts investors to a company.
And that's why Uber needs to prove to its potential investors that it's spending money to make money, especially before it IPOs. It's important to show investors that, although the company is losing cash, it's for a plausible reason. And for Uber, that reason is to grow its other businesses so it doesn't have to solely depend on ride-hailing for its revenue.
You’ve probably used Pinterest to help you with your decorating, a do-it-yourself project at your home, or finding a recipe for dinner. Pinterest’s platform is a mixture of social network and search engine. He has become extremely useful across almost all demographics not just tech-savvy millennials. The company’s platform and it caught on very quickly and saw almost immediate growing success.
Pinterest has reached 250 million monthly users worldwide, and because of that it has become one of the top 10 social media sites.
Earlier this year, the company filed confidentially with the SEC, seeking a valuation of $12 billion. And of course, as soon as this news was revealed investors were more than eager to jump on the opportunity to begin investing in this unique company.
Back in 2017, Pinterest hit $500 million in sales. According to eMarketer, the company is projected to nearly double its ad revenue to more than $1 billion by 2020, which is up from an estimated $533 million in 2018.
Imagine the company growing its ad revenue every year. It’s already expected to hit $1 billion in a year. Advertisements are a huge part of Pinterest’s business model and it’s working...
A Nielsen survey reported that Pinterest users are 38% more likely to try out a new product offered to them through the platform than through the rest of the social media industry.
Pinterest’s site/app is comprised of being mostly visual, and because of that it has been easier for those 250 million users to engage with the content that it provides and that advertisers pay to be displayed. According to data from Pinterest, 83% of weekly Pinners have made a purchase based on “pins” they say from brands. This platform is a gold mine for its advertisers and potential advertisers, but more importantly, it’s a gold mine for Pinterest.
The chance to invest in the next big social media company doesn’t come around often that’s why this company should be on your radar, especially since the time for the company to go public is quickly approaching.
If you're not familiar with this company, you should know that it provides an online and app platform for home-sharing. Users can put their houses, or rooms in their houses, up to be shared with other users looking for a place to stay. It's a unique concept, and it's paying off.
This past year was a phenomenal one for Airbnb. It made more than a billion dollars in revenue for the third quarter of 2018. Not to mention, its platform is growing. According to the company, more than 400 million guests arrivals have been logged at Airbnb lodgings since the service launched in 2008.
Airbnb has been valued at $30 billion and is on the list of the largest U.S. startups. In 2018, it directed a lot of attention toward expanding its business. It's launched new services and offerings to help ramp up that growth.
One example of a new service and offering is adding hotels and luxury homes to its platforms, which gives users more choices, and more familiar choices, but all through the same easy-to-use platform. As of right now, Airbnb is preparing for its public debut which could very well happen this year.
It’s going to be a big year for IPOs! You won't want to miss out. Here's your chance to stay up to date on the latest IPO news and find out which companies are on the verge of going public.
Until next time,
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.