According to Dealogic data, the number of IPOs on the global stock markets in 2019 fell by a fifth to 1,237 – the lowest level in three years. The new entrants raised a combined $188.8bn, down 10% from 2018 and also marking a three-year low.
Businesses have shied away from making their first forays onto the markets partly because of growing global political and economic volatility across the globe, from the UK, to the US and Hong Kong. But 2020 brings with it a new group of IPO hopefuls looking to make it a brighter year for the markets. Who is set to list this year?
Last September, the online accommodation marketplace which has disrupted the hotel industry, announced that it expected to IPO in 2020. There have been sporadic financial updates from the company since it was founded in 2008 by Nathan Blecharczyk, Brian Chesky and Joe Gebbia but according to Bloomberg, Airbnb posted a $93m profit in 2017, with revenues of $2.6bn. It was also profitable in 2018, with revenues over $1bn in the second quarter of 2019. Some estimates say 2019 full-year revenues could hit between $3.5bn and $4bn.
Despite losses reportedly doubling year-on-year in the first quarter of 2019 to $306m as it upped its marketing spend, analysts like Airbnb’s overall profitability prospects. That’s because, as a marketplace, it does not own its own inventory.
It has also widespread geographic appeal and high recognition amongst millennial travellers, with over seven million listings in about 100,000 cities across the globe. In 2017, it was valued at $31bn.
Airbnb's valuation in 2017
The forward-thinking developer of code-sharing software has already set a date to go public – 18 November 2020. However, there is some indecision over whether to IPO or go for a direct listing.
Indeed, it raised $268m in a private round last September, which analysts say gives it enough money to go public without the fanfare of an IPO.
“We want to go public next year as the market is well-aligned for us with massive opportunity and demand for our product,” the company has stated.
“We want to go public next year as the market is well-aligned for us with massive opportunity and demand for our product” - GitLab
It has over 100,000 customers in over 55 countries including Verizon and Alibaba with revenues growing over 140% year-on-year.
However, chief executive officer Sid Sijbrandij says it is not profitable and “not cashflow breakeven but our margins are way north of 80%”. It is valued at $2.75bn.
Data analytics group Palantir, whose customers include the Pentagon and Airbus, is also eyeing a potential 2020 listing. Some estimates value the company as high as $26bn.
Predicted IPO valuation of Palantir Technologies
However, according to Bloomberg, it has never turned an annual profit, and it has high labour costs due to the fact it customises its software for each client. It also experiences “lumpy” sales, making it difficult for analysts to provide forecasts.
These concerns, and a concerted move to raise funds from private investors, could delay a potential IPO to 2022 or 2023.
Investment fund Advent International is said to have hired advisers to prepare the listing of its portfolio company Rubix, which distributes industrial repair kits to large customers in the automotive, cement and utilities sectors.
It is forecast to record a profit of around €300m in 2020, while its IPO valuation could £2.5bn.
Predicted IPO valuation of Rubix Group
The logistics upstart that delivers food, grocery and retail products from local businesses now operates over 3,500 US cities and has raised over $903m since the business started in 2011. It is currently valued at $2.4bn.
Current valuation of Postmates
It faces intense competition from rivals such as DoorDash – also tipped to IPO in 2020 – and Uber. But it has responded through innovation, introducing a monthly membership scheme so users can save on delivery fees.
The premium mattress, pillows, bedframes and even dog bed-maker looks set for a 2020 IPO, following an April investment round which reportedly valued the business at $1.1bn. The e-commerce company has expanded into physical locations with 23 stores and a forward pipeline of 200 more.
According to Bloomberg, it recorded revenues of over $373m in 2018, up 49% from 2017. It is now expected to have hit profitability, while 2020 revenues are expected to reach $556m.
Casper's expected 2020 revenue
The Chinese ride-sharing firm allows customers to reserve cars and bikes via its app, as well as order food. It is expanding internationally and now has 550 million users and 31 million drivers in countries including China, Mexico, Japan and Australia. It is valued at over $62bn.
Number of Didi Chuxing users
Float or flop?
Other notable companies tipped to list in 2020 include cannabis products company Hemptown USA, utilities firm Neptune Energy, grocery business Instacart, footwear company Cole Haan, sports entertainment brand Topgolf, and luxury car maker Lamborghini.
There will be winners and losers among this crop of market hopefuls. Investors considering making bets may look to the performance of 2019’s new listings for guidance.
Unicorn tech stocks including Lyft [LYFT], Uber [UBER] and workplace messaging platform Slack [WORK] generated a lot of excitement, but each struggled to provide meaningful returns after the optimism of opening day. Lyft has fallen from its $87.33 market debut price to $43.10 as of Monday 6 January, while Uber has similarly dropped from $42 to $31.58. Slack has dropped from $38.50 to $23.52.
The writing may well have been on the wall. Each of these companies has been battling concerns around over-valuations, long-term profitability and finance, competition and governance in the run-up to their listings.
"It's very hard for normal investors to determine the actual value of these companies, because most of them don’t go public with profits," said Barry Schwartz, chief investment officer at Baskin Wealth Management.
“It's very hard for normal investors to determine the actual value of these companies, because most of them don’t go public with profits” - chief investment officer at Baskin Wealth Management, Barry Schwartz
Indeed, such worries played a big part in the cancellation of last September of WeWork’s planned IPO. Video communication platform Zoom [ZM] has climbed from a debut price of $65 to $67.28 as of Friday’s close – reaching a high of $102 in July – while med-tech firm Shockwave Medical [SWAV] has increased from $24.80 to $42.16.
There will be continued volatility this year caused by a US Presidential election, the ongoing uncertainty around Brexit and concerns around the strength of the global economy. In addition, there is a deep pool of private capital looking for attractive assets and steering management minds away from the often lengthy, challenging, costly and red-tape heavy listing process.
Focusing on the basics of strong finances, market potential, innovation and strong management will be key to backing future winners.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.