The market for initial public offerings (IPOs) in 2018 saw 190 companies take the plunge, raising $47 billion in collective proceeds. That IPO tally was higher than the 160 offerings in 2017, and far better than the 105 in 2016.
That's the good news. The bad news is that activity came to a grinding halt in the final two months of the year. IPO pricings fell 66% after Nov. 1, throwing cold water all over the market for IPOs heading into 2019.
"The fact that the market is shaky right now, if it stays that way, we will see discounts to get deals done. It is amazing Tencent (Music) pulled off its IPO," Kathleen Smith, principal at IPO specialist Renaissance Capital, told CNBC in mid-December. She also said the online music platform priced at the bottom of its $13-15 range, "and maybe it should have priced below its range, based on how it is trading."
On top of that, the partial federal government shutdown could delay some of the most hotly anticipated IPOs on investors' watch lists in 2019. That's because many workers that review such documents haven't been allowed back to their desks.
Despite all this, 2019 could be a big year for initial public offerings. While the total number could be down, there are some potentially explosive offerings on the horizon, and a couple of CEOs have recently affirmed that their IPOs still are on track.
Here, we look at the 11 hottest IPOs to watch for in 2019. In some cases, the companies have filed official paperwork for an offering. In others, experts are anticipating a 2019 offering based on company statements or actions.
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Potential valuation: $120 billion
Uber, which filed its paperwork in December, is arguably the most anticipated IPO to watch in 2019, and it could also be the year's most prominent and most valuable.
The biggest problem Uber will have going public in 2019 isn't that it's an unknown commodity, but rather that the lengthy bull market appears to be coming to an end at precisely the same time as the U.S. economy is softening. These aren't great selling features for any IPO, let alone one that could value the ride-sharing business at $120 billion.
It has taken Uber a decade to get from fledgling startup to global ride-sharing powerhouse with 75 million riders, 3 million drivers and an estimated 15 million trips completed daily. Over the years, it has raised more than $24 billion in funding. But although the company had little problem finding private investors, the liquidity provided by an IPO is attractive.
"The public market provides greater liquidity," Matt Pencek, director of IPO consulting firm MorganFranklin Consulting, recently told Vox. "The difference between public and private is like owning a home but being told you have to wait for a buyer to come to you, or that you can only sell your home to a few people every few years."
Uber is a company with a troubled past that needs an IPO home run to erase some of the bad memories. We'll know soon enough if it succeeds.
Potential valuation: $41 billion
Palantir Technologies could be 2019's most secretive entrant in the IPO sweepstakes.
Palantir uses artificial intelligence and machine learning to help organizations, many of them in law enforcement, analyze and understand large quantities of data. The company was founded in 2004 by CEO Alex Karp, Thiel - Karp's Stanford Law School classmate - Nathan Gettings, Joe Lonsdale and Stephen Cohen.
Palantir isn't without a little controversy. In a recent Wall Street Journal profile of Karp, the newspaper called the CEO a "self-described socialist," though that runs in complete contrast to the company's work, which has included analyzing data for predictive policing programs. (A Rand Corporation study of such programs in Chicago found they often led to the increased surveillance and arrest of people of color.)
According to reports in September, Palantir looked to favor Morgan Stanley to be its top adviser, looking out to late 2019 or early 2020 for its offering. Morgan Stanley helped the company find private investors, and its understanding of government-backed entities makes it a natural choice. However, in November 2018, Bloomberg reported that Palantir was bickering with Morgan Stanley over its valuation of the company.
Karp did say recently, however, that he doesn't expect the government shutdown to affect his company's IPO plans.
Potential valuation: $31 billion
How do you know a private company is thinking of going public? It hires a chief financial officer with public company experience.
So, when Airbnb announced Nov. 26 that it had hired Dave Stephenson as its CFO after a 10-month search, you just knew the IPO speculation would heat up. Stephenson, who spent 17 years at Amazon.com (AMZN), was most recently VP and CFO of Worldwide Consumer Organization, Amazon's unit responsible for all its global website sales. He also helped integrate both the Zappos and Whole Foods acquisitions.
"Dave is one of the best financial operators in the world and there's no one better prepared to serve as our CFO," Airbnb CEO and co-founder Brian Chesky said in a November statement. "Dave will be Airbnb's quarterback for long-term growth, driving us to be even more efficient and leverage what makes Airbnb unique to create new businesses and continue to expand."
Another indication Airbnb is laying the groundwork for a 2019 IPO? It revealed some of its financial numbers for the very first time in mid-November. For example, in the third quarter, it generated more than $1 billion in revenue for the first time. In 2017, it made $100 million from $2.6 billion in revenue. Airbnb expects to deliver a second consecutive year of EBITDA profitability in 2018.
One last hint: The company reportedly held talks to possibly acquire hotel-inventory seller Hotel Tonight. Those talks ended up bearing no fruit but could indicate that Airbnb is looking for ways to entice potential IPO investors.
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Potential valuation: $15 billion-$30 billion
Whether it's the competition between Lyft and Uber to get the most users for its ride-sharing apps or the race to get to the IPO finish line first, both companies are determined to be the ultimate winner. Lyft did beat Uber in one respect already, however, confidentially filing its paperwork Dec. 6 - a day before Uber did.
Uber currently has a 60% market share compared to 23% for Lyft, according to a Raymond James survey of 1,062 Americans. However, that same study found that Lyft drivers were friendlier and customers more loyal. "While Lyft trails Uber in share, it does have a highly engaged user base - we found that Lyft users actually use the service more frequently than Uber users," the report said.
That at least suggests Lyft might end up being the more popular IPO.
Interestingly, the report also found that only 58% of respondents have used a ride-hailing app, which suggests both Lyft and Uber should be able to continue growing at a double-digit pace.
What should attract investors to Lyft relative to Uber is that it has been growing faster. Between 2014-17, Lyft increased revenues by 223% compounded annually, compared to 146% for Uber.
"In the long run, Uber might take the lion's share of capital in the category," Duncan Davidson, the co-founder of Bullpen Capital, a San Francisco-based venture capital firm, told Yahoo Finance in November. "But if I was a normal investor I'd go into Lyft ... there's more upside being smaller."
Potential valuation: $12.3 billion
Pinterest chose to bring in a heavy hitter to handle the company's investor relations as it gears up for a 2019 IPO, hiring Jane Penner in November.
Penner was the head of investor relations at Alibaba (BABA) when it raised $25 billion in its 2014 initial public offering. Before her work at Alibaba, she was the head of investor relations at a little company called Google, now known as Alphabet (GOOGL).
You don't hire someone of Penner's caliber if you're not getting ready for an IPO.
A further indication the company is preparing to raise money in the public markets: It hired Andréa Mallard as the company's chief marketing officer in November. Mallard is the former CMO of Athleta, Gap's (GPS) growth brand.
Pinterest generated $500 million in revenue in 2017 and was expected to almost double that in 2018. Pinterest, which has become the social media app of choice for people looking to find and shop for products, now has 250 million users, 25% higher than a year earlier.
It could be one of the earlier IPOs to watch on this list - a Dec. 19 Wall Street Journal report said Pinterest's offering could come as soon as April, citing people familiar with the company's plans.
Potential valuation: $8 billion
Once Amazon bought Whole Foods in June 2017, it was only a matter of time before Instacart's partnership with the premium grocery store, which began in 2014 with so much promise, was destined to end. In December, Instacart officially announced the end of its partnership, putting 350 shoppers (the people who pick the products off the Whole Foods shelves) out of work while another 1,000 will be offered shopping roles at some of its other partners including Publix and Albertsons.
The company was founded in 2012 by CEO Apoorva Mehta, who worked at Amazon between 2008-10. And Mehta sees an IPO in the company's future despite the Whole Foods setback.
"An IPO is definitely on the horizon for us," Mehta recently told CNN Business. "As we think about building a long-term company, we think being a public company allows us to do that in the best possible way."
This past November, Instacart raised $271 million in funding, valuing the six-year-old company at $8 billion. An early investor in the grocery delivery startup was Sequoia Capital, whose successful investments include Dropbox (DBX) and Airbnb; more importantly, it was an early investor in WebVan, a grocery delivery service that failed because it grew too fast.
A lot has to happen for Instacart to do an IPO in 2019. If it does, expect it to price in the final quarter of the year.
Potential valuation: $3 billion
Although cybersecurity software maker CrowdStrike has hired Goldman Sachs to get it ready for an IPO in the first half of 2019, it's possible that the company sells itself to a more significant player before even getting to the starting line.
Earlier in 2018, CrowdStrike CEO George Kurtz appeared on CNBC to talk about his company's place on the network's Disruptor 50 list. He wasn't shy, suggesting someone like Amazon.com could be very interested in its cloud-based endpoint security platform, which protects remote devices from being accessed by a third party.
"(Amazon) is a big partner," Kurtz stated May 24. "We actually supply some of the intelligence for some of the services behind Amazon, which is their GuardDuty service, so it's worked out quite well so far."
A recent example of a company selling just before going public is Qualtrics, which sold itself to SAP SE (SAP) in November for $8 billion after filing for an IPO in October. By avoiding the offering, the maker of survey software tools made its investors a few extra billion dollars on their investment.
Potential valuation: $550 million
Beyond Meat might not be a tech IPO, but you can be sure that most investors will be familiar with plant-based food company's story.
Why would Tyson Foods, one of the biggest producers of meat on the planet, invest in a plant-based business? Because it makes good business sense.
"We're so big that the industry can't change if we don't lead," Tyson CEO Tom Hayes said in an August interview."We want to actively disrupt ourselves. We don't want to be Kodak."
The second reason investors have heard about Beyond Meat is the incredible success of its meatless burger with various restaurant chains across the country, including TGI Friday's, Twin Peaks, Veggie Grill and many more.
"It's only the beginning," Caroline Bushnell, the Good Food Institute's senior marketing manager, said in December. "We're in the early stage of a major shift. Companies are realizing that the market for plant-based meat isn't just vegans or vegetarians, it's meat-eaters."
Beyond Meat filed in November 2018 and expects to price its shares very early in 2019. The star power and company potential could result in an oversubscribed IPO.
Potential valuation: $469 million
Gores Metropoulos - one of the few non-tech IPOs on this list - is a "blank check" company formed between Alec Gores, CEO of Los Angeles-based private equity firm The Gores Group, and Dean Metropoulos, the man behind the revival of Hostess Brands (TWNK).
If you're not familiar with blank check companies, also known as SPACs, they bring together management with particular expertise - in this case, it's consumer products and services - to raise a set amount of money it uses to acquire an operating company in this field.
By the rules, it must put the funds raised, less a small amount, to use in the search and due diligence process in a trust account that pays interest. Also, it must complete an acquisition within 24 months of the offering's closing. If they don't, the funds are returned to investors with interest.
Blank check companies, as investments, became popular with hedge fund managers in 2008 when the markets were tanking because they provided an excellent place to park cash in a down market.
Generally, a blank check company is only as good as the management team involved. With Gores and Metropoulos leading the way, it is likely they will get an acquisition done before the end of the 24 months.
The company filed Dec. 11, with plans to raise $375 million (37.5 million units at a price of $10).
Virgin Trains USA
Potential valuation: N/A
While Virgin Trains USA could be the most speculative of the 2019 IPOs mentioned in this article, the mere fact that Richard Branson's name is attached to the November filing should be enough to pull in a few investors.
Virgin Trains USA, formerly known as Brightline, operates train service between Miami and West Palm Beach with construction underway to expand service to Orlando and Tampa.
In November, it announced a partnership with Virgin Enterprises - which operates train service in the U.K. and had 38 million passenger trips in its latest fiscal year - providing the company with an experienced partner for growing its business outside of Florida. As part of the partnership, Brightline was renamed Virgin Trains USA, which should attract more customers to its Miami to Palm Beach service.
In the future, Virgin Trains USA seeks to add routes of 200 to 300 miles that are too short to fly and too long to drive. Up first is a route between Victorville (in southern California) and Las Vegas. Other potential routes include Portland to Vancouver, Dallas to Houston, and Atlanta to Charlotte.
Building new passenger rail lines isn't cheap. For example, the expected cost of the Las Vegas route is $3.6 billion. Investors can expect operating losses for several years, if not a decade or more. But if you believe in rail travel being a solution to America's car problem, Virgin Trains USA's IPO could be just the ticket.
The IPO is expected to raise $100 million, but so far, there is no reliable estimate on company valuation.
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Potential valuation: $10 billion
The workplace messaging app Slack likely is going public in 2019, though Bloomberg reported this year that it's planning to list its shares directly with investors, rather than using an underwriting syndicate to find the buyers. What's interesting is that Bloomberg also reported in December 2018 that Slack had hired Goldman Sachs to lead its underwriting team - a move that, at the time, would've suggested a traditional IPO.
The consensus is that enterprise startups make bad candidates for direct listings because not enough investors are aware of the company's products or services because they're sold to other companies and not the general public. But many people have used Slack's messaging app - it has 8 million daily active users - and doesn't really need a primer on what the company does or why its shares are worth owning.
Whenever Slack goes public, it will have its hands full with some much larger competitors including Microsoft (MSFT) and Google. It also will have to replace its chief product officer, as CPO April Underwood recently announced she would step down to focus on her investment firm.
Is a direct listing the best route? Spotify (SPOT) at least provides a test case. It sold more than 177 million shares to the public and opened at $165.90, well above the $132 reference price set by the New York Stock Exchange. But its stock has since come back to earth, trading around that $132 mark.
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Copyright 2019 The Kiplinger Washington Editors