This past year, 2018, was one of the strongest initial public offering (IPO) markets since 2014. That strength could continue into 2019, which could become an even bigger record-breaking year.
At the beginning of 2018, there were 136 IPOs priced. In total, they raised $37.72 billion. One huge contributor to 2018's increase in proceeds was that the IPOs were valued higher and had bigger deal sizes, with the average being $277.4 million. That's up 24% from 2017's $224.1 million average.
Larger IPOs mean more cash earned, which explains why 2018 was such a huge year for the market. To continue this trend, the market will need some high-valued private companies to step up.
And they are. This year could be the year of the "decacorn" IPO. What does that mean? A decacorn is a company valued at over $10 billion. And 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 many of them, 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 IPO from companies that are well funded, well regarded, mature (at least a decade old), and are household names. This will help create more success stories and high returns for this year's IPOs.
The list of companies expected to go public in 2019 is impressive: Uber, Airbnb, Robinhood, Palantir, Slack, DoorDash, CrowdStrike, GRAIL, WeWork, and Postmates. You may be familiar with them in one way or another.
These are high-value companies that have been operating and growing their businesses for at least the last decade. Going public as a start-up is considered a right of passage. It's one of the most obvious goals for a private company.
Let's take a look at some of these companies' valuations:
- Uber: $100 billion
- CrowdStrike: $3 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, CrowdStrike, and Airbnb. These three companies have crafted themselves into household names and have a lot to gain from going 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 aims to go public in the second half of this year. With a slow start to 2019, Uber took the first quarter to make sure that it had everything in line with its business in terms of financials and growth potential.
The company is seeking to sell $10 billion worth of stock for its IPO. If it succeeds, it could be one of the biggest technology IPOs in history — surpassing Chinese e-commerce brand Alibaba Group Holding’s offering back in 2014. Its IPO raised $21.8 billion. With Uber’s offering, the company is aiming for a valuation between $90 billion and $100 billion. The company was recently valued at $76 billion on the private fundraising market, but now, investment bankers are saying that it could be worth as much as $120 billion.
Last year, Uber reported revenue of $11.3 billion — up 42% from the previous year. The company also reported $50 billion from its gross rides bookings. Despite growth in those areas, the company has lost $3.3 billion — down from its $4.5 million 2017 loss. What’s important to recognize here is that if its losses are shrinking, it could be on the path to future profitability.
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 and will continue to contribute to the company's overall business.
Uber made a recent $3.1 billion acquisition of ride-hailing company called Careem, which is based in Dubai and 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 since it shows current and potential investors that it is serious about moving forward in transportation at a global level.
It’s ride-hailing competitor, Lyft, went public on March 29. And while Lyft is much smaller, it didn’t behave like a smaller competitor when it went public. It priced its IPO at $72 per share and raised about $2.3 billion in its offering, bringing the company to a $24 billion valuation.
Lyft saw a 30% increase throughout its first day of trading. However, as its first week of trading went on, shares fell. Unfortunately, this trend could continue. The IPO dust needs to settle with this one, especially because of the hype leading up to its debut and the skepticism surrounding the company's future growth and ability to be profitable. Those two things are what attract 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.
Right now, the technology our society uses is in desperate need of cyber security to secure our personal and corporate information. As technology advances, so does the need for cyber security. More and more, your information is being exposed because more of our devices demand it.
So it makes sense that the cyber security industry is experiencing tremendous growth. In 2018, cyber security was valued at $137.8 billion globally, so you need to start paying attention to this industry and companies like CrowdStrike.
CrowdStrike is a software maker that stands out from the hundreds of cyber security startups that have emerged in the past few years. Companies are making promises about next-generation technologies' ability to fight cyber criminals, government spies, and hacker activists. CrowdStrike sets itself apart by using artificial intelligence for its Falcon platform to help prevent attacks on computers on or off the network.
Back in October 2018, the company hired investment bank Goldman Sachs to help prepare its public offering. In June of last year, it raised $200 million in a financial round that was led by investors General Atlantics, Accel, and ICP. After that round, the company was valued at $3.35 billion.
It has partnerships with HPE, IBM, Amazon Web Services, Google Cloud, and Dell. Cyber security is a serious matter, and cyber attacks shouldn't be perceived as inevitable; they have the ability to be prevented. They are one of the many things we should worry about when we share our information with a company.
CrowdStrike has been working on expanding its reach by targeting mobile device security. Obviously, this is a no-brainer. There are almost 5 billion mobile users in the world — that’s 5 billion people who are at risk of becoming victims at any point. That’s why the company has introduced an extension of its Falcon platform that provides cloud-delivered endpoint security to mobile devices. This extension will help identify mobile threats and provide insight into potential attacks.
GlobeNewswire predicts massive growth for the cyber security market, reporting that it's forecasted to have a 13.5% CAGR from 2019–2027. The U.S. government and governments worldwide are realizing that implementing cyber security programs is crucial. They have allocated money in their budgets towards cyber security. A partnership with a national government would be a dream-come-true opportunity for a company like CrowdStrike.
Now that you’re one of the first to know about its potential, keep an eye out for a possible 2019 CrowdStrike IPO.
If you're not familiar with this company, you should know that it provides an online platform and app for home sharing. Users can post their entire homes, or rooms in their homes, 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. And its platform is growing. According to the company, more than 400 million guest 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. start-ups. In 2018, it directed a lot of attention towards expanding its business. It's launched new services and offerings to help ramp up that growth.
One example is the addition of hotels and luxury homes to its platforms, expanding the variety of accommodations and giving users more familiar choices. 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.