Upcoming Tech IPOs in 2019
2018 has been a big year of companies going public, but 2019 could be an even bigger year for U.S. tech initial public offerings (IPOs). In fact, 2019 could be a record-breaking year, with valuations for tech IPOs topping $100.0 billion.
Which American tech companies will be hogging the IPO limelight? Keep reading to find three of the best upcoming tech IPOs in 2019.
2018 Has Been a Big Year for IPOs
It has been a busy year for IPOs. By the end of the third quarter of 2018, 173 companies had gone public, raising $45.7 billion. That figure is 46.5% more than what was raised during the first three quarters of 2017, and three times what was raised in the same period in 2016. (Source: “Q3 2018 Capital Markets Watch” PricewaterhouseCoopers, last accessed November 14, 2018.)
The U.S. IPO market experienced its best third quarter since 2014, with 60 companies going public, raising $13.4 billion. This trend was an extension from the second quarter of 2018, which was the best second quarter since 2014.
During the third quarter of 2018, 15 technology, media, and telecom companies had IPOs, raising $4.3 billion. Third-quarter issuance volume was five times that of the third quarter of 2017.
Why have so many companies had IPOs in 2018? You can thank strong corporate profits and a robust macroeconomic environment.
Corporate earnings boasted their best results ever in the second quarter of 2018, with S&P 500 companies earning an average of $38.65 per share. Moreover, consumer confidence levels hit an 18-year high in September. (Source: “JPMorgan’s ultimate guide to markets and the economy,” Business Insider, October 4, 2018.)
Some of the biggest, most recent tech IPOs include Anaplan Inc (NYSE:PLAN), SVMK Inc (NASDAQ:SVMK), Eventbrite Inc (NYSE:EB), and Sonos (NASDAQ:SONO).
Best Tech IPOs to Watch in 2019
Yet, despite how strong a year 2018 has been for IPOs, 2019 is expected to be even stronger, with some of the largest tech IPOs ever. Some of the biggest and best tech IPOs to watch for in 2019 are Uber Technologies Inc., Lyft, and Palantir Technologies Inc.
If all of the expected big tech companies go ahead with IPOs in 2019, it could be a record year for IPOs. Meaning, it could top 2000, the year that tech stocks with nosebleed valuations reached their dotcom zenith.
Dara Khosrowshahi, CEO of Uber, said the ride-sharing platform will be one of the companies going public in 2019. If it happens, Uber could be the largest tech IPO since Alibaba Group Holdings Ltd (NYSE:BABA) went public in 2014.
How much is Uber worth? Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) have both valued the ride-sharing company at upward of $120.0 billion. (Source: “Uber Proposals Value Company at $120 Billion in a Possible IPO,” The Wall Street Journal, October 16, 2018.)
That’s a lofty number and higher than the valuations of Ford Motor Company (NYSE:F), Fiat Chrysler Automobiles NV (NYSE:FCAU), and General Motors Company (NYSE:GM) combined. Those three automakers have a collective market cap of around $112.4 billion.
If Uber raises a typical amount of money for a company of that size, it could bring in as much as $25.0 billion. To put that into perspective, $25.0 billion is 56% of the $44.5 billion raised by all tech companies listed on U.S. stock exchanges in 2000.
If Uber debuts at $120.0 billion, suffice it say, early investors will be richly rewarded. First Round Capital invested around $1.6 million in Uber’s first two rounds of capital-raising in 2010 and 2011. A $120.0-billion IPO would make those shares worth more than $5.0 billion.
There is additional motivation for Uber to go public in 2019. The company made an agreement with investor SoftBank Group Corp (OTCMKTS:SFTBY, TYO:9984)—which owns 15% of Uber—to go public by the end of 2019. If Uber doesn’t follow through, it would have to allow certain investors to sell their shares on the secondary market.
Lyft, the second-largest ride-sharing app, could beat Uber to the IPO finish line. Lyft is expected to go public in 2019 with a valuation topping $15.0 billion.
While Lyft’s valuation is significantly lower than Uber’s, it has been skyrocketing. Lyft’s most recent round of financing valued the company at $15.1 billion. That comes just six months after it was valued at $11.5 billion. In April 2017, Lyft was only valued at $7.5 billion. (Source: “Lyft Picks Underwriters for IPO in 2019,” The Wall Street Journal, October 16, 2018.)
Unlike Uber, which has drivers in countries all over the world, Lyft is concentrated in the U.S.—though it recently expanded into Canada. In 2017, Lyft reported 375 million riders compared to Uber’s four billion.
Like Uber, Lyft has struggled to make money.
Lyft’s third-quarter loss increased to $254.0 million from $195.0 million in the prior-year same period. On the plus side, revenue increased significantly (87.6%) from $300.0 million to $563.0 million. (Source: “Lyft hires JP Morgan to lead IPO that could value company at more than $15 billion,” CNBC, October 16, 2018.)
While no one likes to see a company report continued losses, it’s something that most tech investors are willing to overlook.
Palantir, a data-mining company backed by Peter Thiel, is expected to have an IPO in late 2019, but the possibility of a 2020 IPO has also been bantered about on Wall Street.
The secretive technology giant provides data tools to governments and private-sector companies. Its technology is thought to have helped the U.S. government track down Osama bin Laden. (Source: “Palantir Knows Everything About You,” Bloomberg, April 19, 2018.)
Palantir, which is named after the crystal balls in The Lord of the Rings, started in 2004 and was initially bankrolled by Thiel, a co-founder of PayPal Holdings Inc (NASDAQ:PYPL). Never one to miss out on a good thing, the CIA’s venture-capital arm soon jumped on board.
In 2015, Palantir had a valuation of around $20.0 billion. But some bankers have told the company it could have an IPO with a valuation of as much as $41.0 billion.
Like many technology companies, that would be a lofty valuation. The company told investors it expects to report 2018 revenue of around $750.0 million, up 25% from $600.0 million in 2017.
That would translate into an IPO valuation that’s 55 times its 2018 revenue. Compare that to Uber’s $120.0-billion valuation on expected 2018 revenue of $10.0–12.0 billion.
There is another issue: Palantir hasn’t turned a profit since it started 14 years ago.
Possibilities of Other Tech Companies Going Public in 2019
Outside of the aforementioned three giant tech companies, there are a number of smaller tech companies looking to have IPOs in 2019.
Investors may want to keep an eye out for workplace-messaging platform Slack, video conference software provider Zoom, food-delivery service Postmates, and security firms CrowdStrike Inc. and Cloudflare Inc.
Airbnb, Pinterest, and same-day grocery delivery company Instacart have not committed to IPOs, but they could debut on the stock markets next year as well.
After a few sluggish years, IPOs came roaring back in 2018, and it looks like 2019 is going to be a record year for American tech IPOs. There is good reason for that optimism: the aging bull market may be showing signs of weakness, but the U.S. economy certainly isn’t.
Gross domestic product growth is strong, wage growth is picking up steam, the unemployment rate is at a 49-year low of 3.7%, and U.S. jobless claims are at a 45-year low.
The fact is, it’s a good time for tech companies to go public. It’s also a good time for investors to keep the financials of those tech companies in check. Investor optimism led to sky-high valuations in 2000, and we all know what happened after that.