Technology Stocks: The 3 Most Anticipated IPOs of 2016
It has been a great year for initial public offerings (IPOs). Companies such as Shake Shack Inc. (NYSE:SHAK), Fitbit Inc. (NYSE:FIT), and TransUnion (NYSE:TRU) enjoyed soaring share prices during their first day of trading. Despite the recent stock market tumble around the world, many companies are still eyeing the U.S. stock market for their IPOs. Let’s take a look at some of the hottest upcoming tech IPOs of 2016.
Uber Technologies Inc., the company that revolutionized the transportation services business, was valued at a whopping $50.0 billion in its most recent round of funding. With this kind of valuation, Uber is on its way to become the most valuable venture-backed startup in history. The only company that managed to grow to such scale was Facebook Inc. (NASDAQ:FB), which had a $50.0 billion valuation before going public.
Investors are going to like the strong growth of Uber in recent years. Total bookings grew from $687.8 million in 2013 to $2.91 billion in 2014, and are expected to triple to $10.84 billion in 2015 and reach $26.12 billion the year after. (Source: Reuters, last accessed September 3, 2015.)
Uber’s business model is a simple yet solid one: as the middleman who connects drivers with passengers, Uber keeps 20% of every fare. With people using its service in 300 cities located in 58 countries, Uber is generating big money. Reuters calculated that Uber’s revenue in 2015 could reach $2.0 billion.
No Uber IPO date has been officially nailed down. However, industry analysts suspect the company will go public some time in 2016.
Xiaomi Technology Co. Ltd. is a Beijing-based Chinese electronics company whose core business is making smartphones. According to a research report by the International Data Corporation (IDC), Xiaomi has become the world’s third-largest smartphone maker. It is only behind Samsung and Apple. (Source: IDC, last accessed September 3, 2015.) The company has sold more than 60 million phones in 2014. (Source: TechCrunch, last accessed September 3, 2015.)
In its early days, Xiaomi was selling smartphones at very low prices, marginally above their actual cost. Its strategy was to make money from selling content after consumers purchased the phone. To further reduce costs, Xiaomi smartphones are only available online. There are no physical stores that carry their products.
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Their efforts have paid off. Combining a low starting price and good user experience, Xiaomi has become extremely popular in China. Not only has the younger, tech-savvy generation warmed up to its products, but they also bought Xiaomi smartphones for their parents and grandparents. Another IDC report suggests Xiaomi has surpassed Samsung in China to become the country’s largest smartphone vendor. (Source: IDC, last accessed September 3, 2015.)
In December of last year, Xiaomi raised $1.1 billion in its latest round of funding. What was its valuation back then? Over $45.0 billion.
Airbnb Inc. owns and operates an online platform that allows homeowners to list their homes and apartments for short-term stays. It has over 1.5 million listings in 34,000 cities located in 190 countries. The company was founded in 2008 and is headquartered in San Francisco, California.
Airbnb generates revenue mainly by charging a service fee from bookings. The service fees range between six percent and 12% depending on the price of the booking. The company also charges the host three percent from hosts for each booking for credit card processing.
According to The Wall Street Journal, Airbnb said that it expects revenue to reach $850 million this year. The company’s forecast suggests that its earnings before interest, taxes, depreciation and amortization would reach $3.0 billion by 2020. Right now, the company is not yet profitable, with a forecasted operating loss of approximately $150 million this year. (Source: The Wall Street Journal, last accessed September 3, 2015.)
Airbnb raised $1.5 billion in its latest round of funding. The deal valued the company at $25.5 billion. (Source: The Wall Street Journal, last accessed September 3, 2015.)