With the S&P500 skyrocketing by ~15% YTD and Nasdaq climbing by more than 19%, timing seems perfect for founders and early backers to cash out or get the much-needed capital influx.
We saw a fair share home-run IPO’s such as Beyond Meat and Zoom Video Communications as well as a few flops such as Lyft and Uber Technologies.
And with the year not even half over we have a lot more to look forward to.
What can be learned from the results so far and what are the prospects of future upcoming initial public offerings?
As it is inherent to human psychology (and to prudent investing) to focus on the risks before the rewards it is best to start this overview with the largest flops so far.
The most anticipated IPO of 2019 is shaping out to be somewhat of a disappointment.
I know it is a bit early to call an IPO a flop when its shares traded for just one day, even if the results were as miserable as they were, with share price dropping 7.62% on the first day of trading (May 10th).
However, we should consider that just a month ago UBER (Ticker: UBER) was aiming at an IPO valuation of $100 Billion, when they actually managed to reach a total valuation of $75.5 Billion (and that’s if you round up) raising $8.1 Billion at $45 a share.
Timing played a large role in the IPO’s outcome and the initial trading – the company updated its preliminary estimate of Q1/19 results in the IPO documents, little to say, the results weren’t flattering.
The fact that Uber and Lyft drivers went on strike just before the IPO and the trade war with China was reignited didn’t help either, but in my humble opinion, it was Lyft’s IPO that really screwed the pooch for Uber.
Uber and Lyft competed on who will be the first to go public and Lyft won that race offering its shares to the public on March 28th, 2019.
Lyft’s IPO (Ticker: LYFT) started off strong, raising $2.34 Billion, with shares going public at $72 – at the top of its price range.
The IPO price provided a valuation of $20.6 Billion which translates to almost a 40% premium over its private valuation. Not to mention that on the first trading day the stock touched a high of $88.6 per share before closing at $78.29.
But just like an enthusiastic sprinter realizing he was actually competing in a marathon the strong start didn’t much matter.
Lyft’s shares plunged by 29.04% since its initial offering and due to the numerous business similarities with Uber, Lyft’s performance provided a pessimistic outlook for Uber as well.
While the ride-hailing industry was beaten and abused by the capital markets it is not to say all IPO’s this year performed negatively. On the contrary, out of the 77 IPO’s of companies with a market cap greater than $50 Million, 56 are in the green.
In fact, there are too many successful IPO’s to cover them all, some mentionable ones include:
- Levi Strauss & Co. (Ticker: LEVI) which is up 31.65% since its IPO on March 20th
- Pinterest (Ticker: PINS) which is up 52.89% since its IPO on April 18th
- Tradweb Markets (Ticker: TW) which is up 59.26% since its IPO on April 3rd
But the 2 IPO’s that really catch the eye are those of Zoom and Beyond Meat.
Zoom Video Communications (Ticker: ZM), the developer of video conferencing software, listed its shares on April 17th at $36 per share, above its price range of $33 – $35.
Zoom raised around $750 Million for a total valuation of almost $9.3 billion, or nine times that of its latest private market valuation.
Not resting on its laurels the stock exploded and at the moment of writing is priced at $79.63 per share or a whopping 121.19% upside, amazing performance for a relatively obscure unicorn.
The plant-based meat company which was founded by Ethan Brown in 2009 is generating so much buzz and expectations to disrupt/augment the plant-based meat markets its stock is basically boiling.
The marketing and branding efforts of the company are as important to its growth as the R&D efforts, the ability to draw in carnivores in addition to vegetarians could be pivotal for Beyond Meat and these efforts are assisted by endorsements from famous personalities such as Bill Gates, Leonardo DiCaprio and even Snoop Dogg.
Beyond Meat (Ticker: BYND) was listed on May 1st at the higher part of its $23 -$25 range, the company raised $240M to be invested in R&D for a total post IPO valuation of $1.66 Billion.
Since the shares were listed the stock exploded by ~165% closing on Friday at 66.22 per share.
Things to come:
2019 is expected to provide much more IPO drama with names like Airbnb, Slack, Robinhood and WeWork expected to go public.
The current trend seems to favor companies with a strong service/product offering while shying away from companies based on the gig economy.
It would be interesting to see if this trend continues and if it does what it bodes for the sharing economy in general.