A better unicorn IPO leaderboard

With real-time performance data on the latest initial public offerings

Initial public offerings come up a lot in my conversations nowadays, thanks to my job. Plenty of people I meet have opinions about unicorns and IPOs. With companies staying private longer, many have achieved enormous valuations by the time they go public, when the rest of us finally have an opportunity to invest in them.

The most common question I get about tech IPOs is: How do you even keep track of these things? I was surprised that I couldn’t find a convenient dashboard that’s updated regularly to track the performance of unicorns after they go public. So I built one.

Summary: Here’s the Unicorn IPO Leaderboard, updated in real time with the latest IPOs. Keep scrolling to see why I built it.

Note: The above is a snapshot of the leaderboard. See the latest with live data here. (Chinese companies are identified in both English and Mandarin.)

Why build yet another unicorn IPO tracker?

Always up to date

It’s 2020: A good leaderboard should contain all the latest unicorn IPOs, with up-to-date performance data. I found a few unicorn IPO charts and infographics being passed around, like this popular one from Howmuch. It’s supposed to be “The Hottest IPOs in 2019,” yet it was published in July 2019 with data from 11 months earlier. Never mind that Snap went public in 2017. Sure a JPEG is easy to share, but this completely defeats the purpose of publishing on the web.

International IPOs

An IPO leaderboard isn’t complete if it only contains U.S. unicorns. Half of the current top 10 decacorns, unicorns with more than $10 billion valuation, are Chinese. A wave of Indian unicorns like Paytm and OYO are joining the herd. We here in the U.S. are increasingly impacted by international tech unicorns like Bytedance with its TikTok app. Also, why not keep an eye on other fast-growing markets and companies that you can put your money into? It’s so much easier now to buy stocks of companies wherever they happen to be.

Related time comparisons

Folks on Wall Street like to talk about the “IPO pop,” the difference between the IPO price and the price of a company’s shares at the close of the first day of trading. It’s a gauge of how well the IPO pricing process went. Company management and bankers spend weeks narrowing the IPO price range, based on feedback from big investors. Then the market, with its scale and efficiency, shows how accurate they are on the first day of trading.

The other important milestone comes when the lock-up period expires, typically between 90 and 180 days after an IPO prices. This means that company insiders are allowed to sell their stock. You’ll often see a falloff in trading in the stock in the weeks that precede the lock-up expiring, as investors try to anticipate how may shares from insiders could flood the market. (That can happen when early investors distribute shares to their limited partners who may sell them. Or when companies themselves help insiders sell shares through a so-called registered offering.)

By the end of the lock-up period, the greenshoe options used to stabilize the stock price also run out. Without these artificial constraints on supply and demand, the market more efficiently reflects the company’s true worth through its stock price.

Public market valuations, certainly after a stock has traded for a material amount of time and lockups have come off, are much more rational.

― Fred Wilson, The Great Public Market Reckoning

To compare unicorn IPOs across a comparable time scale, the leaderboard shows stock price performance at one day and one year. By then, the lock-up period has ended, the company has a few quarters of performance numbers under its belt, and the stock price is more rational. For companies whose shares have traded for less than a year, the leaderboard shows the latest price performance. Another benefit of looking at the one-year mark is that insiders pay the much lower capital gains tax, not income tax, after they sell.

This tech IPO tracker from Recode contains up-to-date performance data, but still suffers from not having an apples-to-apples time scale. You can’t compare the performance of an IPO five years out with the performance of a public offering after its first day.

This first iteration of the unicorn IPO leaderboard focuses on IPO price performance. Of course, what matters to investors, employees, customers and the rest of a company’s stakeholders is whether the company builds a sustainable business over the long term. I have some thoughts around ways to showcase performance at longer-term milestones. More on this in a future post.

Know whether a unicorn is just riding the bull market

If you got into the Spotify direct listing at $132 a share, you may be grinning a year later at it’s 9% return. It’s no Netflix, but at least it’s better than Pandora. Did you know that if you had put your money in an index that tracks the S&P 500, you would’ve been even better off, with a 10% return?

The unicorn IPO leaderboard uses a simple solution: subtract the market (S&P 500) return out of a stock’s price return. It even makes this adjustment for Chinese companies. For U.S.-based investors like I am, the S&P 500 is an easy way to invest. If I invest in a foreign unicorn, I’m usually interested in that specific company, not looking for a way to park my money in a different international market. So if that unicorn doesn’t perform as well as the U.S. market, I’d just move my money back home.

The most the stock market moves by in a year is about -10% to 20%, apart from downturns and rare events like the 2008 Great Recession. Because of this, removing the gap between stock performance and market performance matters the most with those unicorn stocks that straddle the break-even line.

What IPOs does the leaderboard track?

To be on the leaderboard, companies need to be valued at $1 billion, usually determined by the last funding round before the IPO. Some “undercorns” with valuations that fall below $1 billion during the IPO pricing process are also included. Casper is a good example.

Direct listings like Spotify and Slack also are included. Companies on the leaderboard don’t need to trade on a U.S. exchange. Note that companies that go public through a direct listing do not have lock-up periods.

I take out companies that were acquired, went private, or shut down. An example is Pivotal. VMware bought it a year and a half after its IPO.

Please reach out if you find anything missing.

Unicorn IPOs on the horizon

The decade is off to an eventful start, with wildfires in Australia, a drone strike that, thankfully, didn’t start World War III, the coronavirus pandemic, and Brexit. And we have a U.S. presidential election this November that will cause some investors to take a wait-and-see approach. It will be interesting to watch when and how the next wave of unicorns goes public, including the following companies, with their latest public valuation:

1. Ant Financial 蚂蚁金服 ($150 billion)
2. Bytedance 字节跳动 (parent company of TikTok 抖音, $75 billion)
3. Didi Chuxing 滴滴出行 ($57 billion)
4. Stripe ($35 billion)
5. SpaceX ($33 billion)
6. Airbnb ($31 billion)
7. Kuaishou 快手 ($28 billion)
8. JD Digits 京东数字科技 ($27 billion)
9. Palantir ($20 billion)
10. Juul ($20 billion)

Data sources and further reading

Public market data for the leaderboard comes from SEC filings and Google Finance. The latest private company valuation data comes from Pitchbook.

Here are two alternatives to the unicorn IPO leaderboard. To me, they contain either too much information or are not updated with sufficient frequency. If you want to make your own, you can use your favorite portfolio tracker / watch list tool instead.

• The Hottest IPOs in 2019: What if You had Invested $1,000 When They Went Public by Howmuch
• How the tech unicorns of 2019 are doing on the stock market by Recode

Here are two sources to track pre-IPO unicorns:

• The Billion Dollar Startup Club by The Wall Street Journal and Dow Jones VentureSource: This is a good public and up-to-date source of unicorns that haven’t IPO’ed yet. The opposite of this leaderboard.
• The Prime Unicorn Index: an equally-weighted price return index that measures the share price performance of U.S. private companies valued at $500 million or more.

Scary disclosure: I write about things I may invest in. You should also do your own research before investing.

Photo of the Børsen spire by Pierre Châtel-Innocenti.