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, Airbnb, Palantir, Lyft, Slack, DoorDash, CrowdStrike, and GRAIL.
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: $76 billion
- Airbnb: $31 billion
- Palantir: $20 billion
- Lyft: $15 billion
- Slack: $7 billion
- DoorDash: $4 billion
- CrowdStrike: $3 billion
- GRAIL: $2.5 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, Lyft, and Airbnb. These three companies have crafted themselves into household names and have a lot to gain when they go public...
Uber 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 targeted to IPO in the first quarter of 2019, but that could be pushed a little bit. This gives Uber the opportunity to get everything in line with its business in terms of numbers and growth potential.
Uber's revenue growth increased by 9% from its second quarter to $2.95 billion. Unfortunately, its net losses increased by 32% quarter over quarter. But that's no surprise to Uber because it's been focused on growing its business.
The company wants to expand its other areas of business, like Uber Eats, scooters, bikes, and freight. 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.
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.
Lyft is similar to Uber. It's also a ride-hailing company. Lyft is getting its ducks in a row so it can meet an expected IPO sometime in the first half of 2019.
It's hard not to pit these two ride-hailing companies against each other because they both have similar business plans and have been discussing IPO-ing in 2019. But they're also different in a lot of ways. Lyft is smaller in terms of valuation with a $15 billion valuation, instead of a $76 billion. But that's still a massive valuation for a company that was founded only six years ago.
Lyft has raised $4.9 billion in capital. And it reported $909 million in revenue in the first half of 2018. This was a 120% increase from the previous year's first half. And Lyft is growing its revenue, which is a good sign.
According to data from Edison Trends, Lyft now controls about 31% of ride-sharing spending in the U.S., compared to the low- to mid-teens it saw in 2016. Lyft is rapidly growing its market share. And in a few years, it could reach a 50% or higher market share. And an IPO would make the company's race to profitability even faster.
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 could be planning for an IPO in the middle of 2019 or earlier.
This will 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.