2017: Do Not Miss Out On This Spectacular Year for IPOs
CNBC released the Disruptor 50 list for 2017 recently, and the companies are bigger and more mature than ever. Seven of the fifty companies have been on the list for four straight years, including Airbnb, Dropbox, Palantir, Pinterest, SpaceX, Spotify and Uber. The combined value of these seven companies is greater than $120 billion, with Uber having the highest valuation, at about $68 billion.
The first four months of this year has already been a record year for IPOs. Three of the more prominent companies — including SNAP, OKTA, and Cloudera — have happened since March 1st. Cloudera is the only issue that’s higher than its opening-day price.
The surge in IPOs is expected to continue for this year. There’s already a pipeline of 33 new registrants in the current quarter. Many of these private companies aren’t just capitalizing on the positive IPO trend, but some are going public due to venture capitalists (VCs) pulling back on “down rounds” — where VCs lower private-company valuations with further rounds of funding.
According to Renaissance Capital, a premiere specialized IPO investment firm, Dropbox and Spotify are up at bat to go public by the end of the year. According to Drew Houston, the CEO of Dropbox, the company has already lined up possible underwriters for an IPO. Spotify is currently pursuing direct listing alternatives on the NYSE for next year, skipping the traditional underwriting and issuing process of going public in a stock exchange.
Airbnb is expected to go public next year, while Lyft may file for their public listing before Uber. Lyft recently garnered support, along with a $500 million investment, from GM to help drive the ride-hailing company’s next cycle of growth.
The Renaissance IPO ETF (IPO), which tracks a basket of top IPO companies, is up about eighteen percent year-to-date, which is largely driven by Shopify, whose stock is up by more than 115% year-to-date and up almost 250 percent over the past trailing twelve months.
Both Snap and Twilio have been struggling. Snap’s stock recently plummeted due to their dismal first earnings report as a public company. Reports state that Facebook is encroaching on Snap’s business by creating similar features on their already popular and prevalent platform and applications. Tech investors are now more concerned than ever about Facebook’s power over future competition on innovative apps and features in the Social Media sector. It seems like Facebook could just crush its competition just by providing similar applications and services of future social media companies. Twilio’s stock started its gradual decline last fall on concerns on slower than expected growth. Apparently, Twilio is facing a decline in revenues due to its biggest customer, Uber’s, slower growth.
Payments App, Square, seems to be doing well by diversifying its revenue streams through broader geographic reach, along with its banking and loan service offerings. Okta and Cloudera, have both done well as recent IPOs — Cloudera is currently trading ten percent above its opening-day price, and Okta’s stock reached a high of $26.90, which is a 14.42% gain from its opening-day price, before dropping off to similar levels.
Originally published at Henry Kwong, CPA.