Which Companies Will Have IPOs in 2018?
With the year flying by quickly, the chances of more landmark initial public offerings (IPOs) happening in 2017 are getting slimmer. While Snap Inc (NYSE:SNAP) had a wild ride when it hit the public market earlier this year, there hasn’t been much in the way of news concerning other major tech companies launching IPOs in 2017.
With BuzzFeed’s recent announcement that it will hold its IPO in 2018, other companies may be waiting for that calendar switch before going public. This makes tech IPOs in 2018 one of the hottest topics of discussion.
Remember that 2016 was a rather weak year for tech IPOs, at least in terms of volume. That year, 30% fewer companies opted to go public compared to 2015, and 2015 was already on the low side. On the flipside, those few companies that “IPOed” in 2016 (21, to be exact) would have yielded a combined 40% return for an investor heady enough to go all-in with the newly publicly traded stocks. (Source: “Why 2016 Was Actually a Pretty Good Year For Tech IPOs,” Fortune, January 4, 2017.)
Which illustrates the hunger in the market for fresh tech stocks becoming available to investors, even if the current political and economic climate might scare off a few executives from taking the plunge and initiating an IPO.
While the 2016 IPOs were largely a collection of smaller companies, without many big-name heavy hitters or “unicorns” in the bunch, IPOs in 2018 could be an entirely different beast.
As you’ll see below, not only are some of the likely public offerings in 2018 to come from big-name, world-renowned companies, they have sky-high valuations that can lead any investor to drool.
Just look at the Snap IPO from earlier this year. Despite entering a crowded social media market with Facebook Inc (NASDAQ:FB) breathing down its neck in terms of competition, and warning signs going off comparing Snapchat to Twitter Inc (NYSE:TWTR), Snap was still able to make off with huge gains.
The SNAP IPO stock price was set at $17.00, but quickly rose by 41.2% at the open, ending its first day of trading above $24.00 per share. While Snap stock has since fallen off—now down 16% since that whirlwind start—the fervor shows just how much investors want to get in on the IPO market, especially when it comes to tech IPOs in 2018.
That said, let’s look at some some of the most anticipated tech IPOs in 2018.
|List of Potential Tech IPOs in 2018|
With an Airbnb valuation of $30.0 billion, many analysts are closely watching for any news related to a possible Airbnb IPO. While there’s no firm date set, CEO and co-founder Brian Chesky has said that the company was preparing an Airbnb IPO “as soon as possible,” with the caveat that the company did not intend to go public “in the near-term.” (Source: “Airbnb prepping to be IPO-ready, but still has no ‘near-term’ plans,” Wired, November 17, 2016.)
One big factor is pushing for an Airbnb IPO in 2018: profitability. The company managed to have positive revenue in the second half of last year, and it expects to see those gains continue. This increases the chance of us seeing an Airbnb ticker in the stock market sooner, rather than later.
Even more impressive is that the hotel-killer managed to see profitability despite being mired in legal battles across the United States. Cities like New York and San Francisco have passed laws limiting the number of nights a host can list their homes, obviously impacting Airbnb’s bottom line. (Source: “Airbnb’s First Profits Lay Groundwork for IPO,” Investopedia, January 30, 2017.)
The fact is that Airbnb has a proven product, profitability, little direct competition, and a global appeal. While competitive apps are sure to enter this market, and legal troubles may present obstacles both in the present and the long run, Airbnb is poised to be one of the best tech IPOs when it does eventually hit the markets.
Uber Technologies, Inc. has had a bad case of foot-in-mouth disease, with scandal after scandal hitting the already weakened and exposed public relations (PR) side of the company, which has come to be something of an Achilles heel.
This amount of ill will in the public eye alone will likely delay the Uber IPO, if only so the company can put some distance between its IPO date and its scandals like public spats with drivers (even one involving CEO Travis Kalanick), scabbing against cabbies during a strike against the immigration ban, joining—then resigning from—President Donald Trump’s business committee, etc.
Not to mention that the company recently had to flee the Chinese market due to being outperformed by local competitors, which is more bad news that Uber would rather put behind it. Having a buffer period—so the company can insulate itself from a pretty rough past—makes sense, and we may see the ride-sharing app push for an IPO in the new year.
Despite all these PR gaffes, Uber is still in possession of an absurdly high valuation. The gargantuan $66.0-billion Uber valuation is a massive feather in the company’s cap, and all the concerns surrounding the PR side of the company are sure to melt away by 2018 (provided new ones don’t emerge). This may open the way for an Uber IPO in 2018.
Uber might want to hurry. With companies like Lyft challenging Uber’s market, not to mention winning the PR wars, the company may need a boost sooner, rather than later, that an IPO can provide.
3. Palantir Technologies
Perhaps one of the companies closest to launching an IPO, possibly even before 2018, Palantir Technologies has been on the radar of many analysts due to its strong leadership and performance.
Chairperson Peter Thiel, alongside CEO and co-founder Alex Karp, is leading the company to prominence on the back of its specialization in big data analytics.
Thiel has become something of a Trump whisperer for the tech world, being the president’s staunchest ally from the typically liberal Silicon Valley. Having a direct connection to the presidential administration puts the company in a uniquely favorable position.
Other signs, like a liquidity event in which Palantir agreed to buy up to $225.0 million in common stock from its employees, point toward a potential preparation for a future IPO.
The company reportedly offered $7.40 per share, which is a premium compared to the roughly $7.00 that outside buyers had been paying at the time on the secondary market. Bankers had, in March 2016, devalued the shares further to just below $6.00, which makes that $7.40 a pretty sweet deal for employees, at least in the short term. (Source: “Why a Palantir IPO might not be far off,” TechCrunch, June 24, 2016.)
While there are a variety of possible explanations for the stock buyback, one very plausible one could be that the company is in preparation for an IPO. With a Palantir IPO valuation of $20.0 billion, you have strong support from restive investors looking to invest in a strong tech IPO.
Much like Airbnb (and unlike Uber), Palantir is close to profitability. So close, in fact, that the IPO-averse Karp has spoken about delaying profitability in order to keep the company focused on expansion.
At a 2016 technology conference, Karp told his audience that the government side of Palantir’s business is already profitable, with the private sector-facing arm of the company expected to enter the black in 2017.
“Philosophically, I have always been opposed to going public,” said Karp at the conference. “First of all, I have noticed, very empirically … I have never seen a company that is public compete effectively against us (for engineers).” (Source: “Will Palantir Launch an IPO?” The Wall Street Journal, October 26, 2016.)
Sentiments like these will naturally temper some of the fervor building in anticipation of a possible Palantir IPO in 2017, but they could point toward an IPO in 2018 instead.
After all, the company will be unable to delay profitability forever and, eventually, with such a huge valuation, you have to expect that Palantir will hit the public markets. The question, of course, is when. And 2018 is looking like a good year for the company to hit the stock market.
According to TechCrunch, multiple insider sources have said that, despite Spotify’s original plan to make its stock available to the public in 2017, the streaming service is now looking at 2018 as the year to file for its IPO. (Source: “Sources: Spotify may delay IPO to 2018 as it rethinks licensing deals,” TechCrunch, February 2, 2017.)
The unnamed sources said that the delay was intended to buy time for Spotify so it can build up a better balance sheet and work on shifting its business model to improve its profit margins. Much like the situations of many other companies, the Spotify IPO is being hampered by a large accumulation of debt and no clear path to profitability.
Sources also said there’s a push for a Spotify valuation of $11.0 billion—$13.0 billion, citing the numbers as an “emotional target.” Compared to the last-reported valuation of $8.53 billion in 2015, this new valuation target would represent a significant upgrade. The $8.0-billion valuation is still considered to be the functional valuation, so the company would need to add some serious momentum if it wants to tack on another $3.0 billion to $5.0 billion to that figure. (Source: Ibid.)
And Spotify has a number of other more technical issues that it will need to sort out in 2017, making the following year a more likely time for a Spotify IPO, which could end up being one of the most exciting tech IPOs in 2018.