Jan 7, 2019
Major US Tech IPOs in 2019
WHAT IS AN IPO:
An Initial Public Offering (IPO) is an event where a private company makes its shares available to public investors, in the process becoming a publicly listed company. This process is typically done by listing the company’s stock at an exchange such as BSE or the NSE in India or the New York Stock Exchange in the US.
When a company IPOs, it means that either the company is looking to raise capital from the public market or the existing investors are selling their stake to the public. If the company is raising capital, it needs to disclose the intended use of funds in its prospectus (this is a pre-IPO filing every company has to make). Being a public company also allows the company’s employees to more easily sell some of their privately held stocks that was previously illiquid.
Becoming a public company also means that the company faces greater scrutiny. The company is held accountable to the shareholder, must disclose it’s financials to the public, and abide by exchange regulations.
HERE’S A LIST OF A FEW MAJOR TECH IPOs IN THE US:
Valued at north of US $60 billion, the global leader in ride sharing is preparing for its highly anticipated IPO in the second half of 2019. In preparation, the company has hired a CFO and has made efforts to reduce losses. We dove into Uber’s numbers to see if the company can justify its lofty potential US$ 120 billion dollar IPO here.
Valued at US $31 billion, Airbnb is one of the most valuable startup in the world. The company runs an online community marketplace for people to list, discover, and book accommodations around the world. Since its inception, it has raised more than US $4.4 billion in venture capital and is expected to achieve a US $4 billion revenue run rate this year. Although it is still searching for a CFO, it is targeting June 2019.
For investors in India who may not be familiar with the company, Lyft is the second largest player in the US ride sharing market. It is valued at US $15 billion. Compared to Uber, it is much smaller, having only ~30% market share (vs Uber’s dominant ~70% market share). Nonetheless, the company is planning on beating Uber to the IPO punch in the first half of 2019, in an effort to better capture investors interest in ride sharing and raise significant capital to continue its battle with Uber.
Tanium is one of the hottest cybersecurity startup in the US. Valued at more than US $5 billion dollar after its latest investment round, the company is planning for an IPO in 2019. Currently, the company has been growing at a very rapid pace. In 2017, it signaled that it made more than US $230 million in recurring revenue, an increase of 100% from the previous year. It also stated that it has achieved profitability.
RISKS & REWARD
Buying a newly listed stock can be a risky proposition. After its IPO at US $ 38/share in May 2012, Facebook underperformed compared to the broader market for the following 18 months. Meanwhile, if you had bought stocks of Google when it went public in August 2004, you would have enjoyed more than a 160% return within the year. While investing in companies at IPO can return large returns in the long term, one should be able to navigate potential early price volatility due to unjustified market exuberance.
This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.
Our team members at Vested may own investments in some of the aforementioned companies. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.