Upcoming IPOs for 2019
It will be a difficult year for IPOs in 2019. We have a look at the top IPO contenders for 2019 and outline the biggest stocks that could go public.
Best upcoming IPOs in 2019
There are several trends worth watching as the IPO market unravels in 2019. The number of IPOs around the world is expected to fall to a range of 1150-1300 in 2019, but proceeds are expected to meet or exceed the record amount raised last year. A total of 40 ‘unicorns’ – firms that list with a valuation above $1 billion – went public last year, raising $32.2 billion, and their numbers are expected to rise in 2019, led by three of the biggest IPO contenders: Uber, Lyft and Palantir.
While growing geopolitical uncertainty is likely to see a subdued start for the IPO market in early 2019, activity is forecasted to rise in the latter half of the year when businesses will be hoping the headwinds posed by the likes of the US-China trade war and Brexit have subsided. However, this should mean the quality of new entrants is higher. There were several IPOs either cancelled or delayed last year and although many of these are now expected in 2019 there is every chance that more IPOs could be pushed back this year.
Still, tech stocks will continue to dominate the IPO space. A total of 254 tech stocks went public last year - more than any other sector - and the sell-off of larger tech stocks like the Facebook, Amazon, Netflix and Google (FANGs) in the second half didn’t stop new entrants joining the market. The other standout sectors that attracted new listings in 2018 included industrials (205), healthcare (193), materials (150) and consumer products (137).
The legalisation of marijuana in Canada and in more US states is set to pave the way for a slew of new marijuana stocks to go public in 2019. Acquisitions and investments by the likes of major tobacco companies has already demonstrated the significant appetite.
The US has remained the most popular destination for IPOs, and new listings have also raised the most money. The NASDAQ has seen the most listings while the NYSE has raised the most money. Together, nearly 160 companies have raised over $43 billion, up 31% and 57% YoY, respectively.
Over 40 foreign firms launched an IPO in the US in 2018, 23 of which have come from China, including Pinduoduo and electric car firm NIO. That is despite the ongoing trade war between the US and China that has resulted in a flurry of tariffs being slapped on one another’s goods.
Still, most of the largest IPOs in 2019 are expected to occur in the US where several companies could earn valuations that would break the current record held by the Chinese firm, Alibaba Group, which completed a $25 billion IPO in 2014 (including the follow-up sale by the underwriters).
Uber IPO ($120 billion)
Uber is said to have confidentially filed for an IPO soon after smaller rival Lyft publicly announced its plan to list late last year. Original valuations stood at $120 billion but reports now focus on a figure north of $100 billion.
The ride-hailing company (with a food delivery arm Uber Eats) has been trying to restore its reputation before launching one of the largest IPOs of all-time targeting a sum well above the $76 billion valuation it boasted following its most recent fundraising.
Uber has been dogged down by legal cases that have challenged its business model, most notably in London where it managed to win a 15-month probationary licence in June from regulators that were to ban the company for not being 'fit and proper'. That is considerably less than the 18-month licence it had been awarded previously and the five-year licence it had applied for.
Further cases – settled and ongoing – over everything from hackers stealing customer data to harassment to the rights of its employees remain something of a barrier to Uber’s IPO. There was also the distraction of a possible merger with another 2019 IPO candidate, Deliveroo, which have since subsided.
If Uber does push ahead with an IPO it is likely to be in the latter half of 2019. The firm will have to convince the market that it has cleaned up its act and that it can win the support of regulators to ensure a stable outlook.
Palantir IPO ($36 billion-$41 billion)
The data-mining company co-founded by Peter Thiel (one of the brains behind payment processing giant PayPal) is reported to be plotting an IPO as early as the second half of 2019, although there is a suggestion it could be postponed into 2020 in the hope of earning the top-end of the valuation range. It was last valued at around the $20 billion mark under a fundraising round in 2015.
Palantir has earned a reputation for being highly secretive but is known to be one of the biggest players in Big Data. A Guardian headline in 2017 said Palantir 'wields as much real-world power as Google' while a more recent Bloomberg article warned 'Palantir knows everything about you'.
The company may therefore struggle with the scrutiny that comes with going public and the transparency the market demands, particularly with heightened concerns about how data is used. However, it is reported the 14-year old company is expecting to turn a profit this year – a rare achievement for many tech IPOs selling the growth story.
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Airbnb IPO ($31 billion)
Airbnb’s chief executive and co-founder, Brian Chesky, has signalled the intent to take the company public in 2019, although some reports suggest it is considering undertaking an unconventional direct listing as music streaming site Spotify did. It is thought that the departure of chief financial officer Laurence Tosi, earlier this year, was caused by his disagreement with Chesky’s decision to postpone the IPO beyond 2018. After a 10-month search, Airbnb tapped a senior Amazon executive as his replacement. Dave Stephenson, who was vice-president and CFO of the e-commerce giant’s global website sales, is seen as a key appointment ahead of any IPO.
The firm, an online marketplace that allows people to rent out accommodation on a short-term basis, has raised $4.4 billion as a private company. Airbnb is thought to have made around $4 billion in annual revenue in 2018 and profitable at the earnings before interest, tax, depreciation and amortisation (Ebitda) level. The firm made its first profit at the Ebitda level in 2017.
Chesky has previously outlined his ambitions to make Airbnb a global travel community that is built on experiences and content. Comparisons to hotel chains have started, but Airbnb is a very different business with an equally different strategy and it will have to ensure it gets that across. It recently hired Fred Reid, the founding CEO of Virgin America and former president of Delta Air Lines and Lufthansa, as its new global head of transportation.
Lyft IPO ($15 billion)
Lyft plans to launch an IPO in the first half of 2019 as it aims to pip its larger rival Uber. It filed confidential paperwork but has not yet revealed how many shares it will sell or at what price.
The second largest ride-hailing service is thought to have benefited from the scandals and reputational damage that Uber has suffered, but both companies are still reported to be losing heavy sums. Lyft’s third quarter revenue reportedly rose to $563 million from $300 million the year before but losses ballooned to $254 million from $195 million.
Whoever lists first will gain a first-mover advantage and act as a benchmark for the other, although Lyft co-founder John Zimmer recently said he was not racing with Uber to launch an IPO first. But Lyft’s more modest valuation and a less-dented reputation could give the company an advantage over its bigger rival.
Pinterest IPO ($13-$15 billion)
Pinterest is a social media app that is all about discovery and using user’s content to inspire new ideas and, more importantly, purchases.
The FT reported in late January that Pinterest had hired Goldman Sachs and JPMorgan Chase to advise on its IPO, where it is reportedly looking to raise over $1 billion. The company’s financials are not public, but annual revenue estimates for 2018 vary from $550 million to $1 billion. This has raised questions about its lofty valuation. The most recent financing round in mid-2017 valued the company at $12.3 billion.
Although value is being attributed to the company’s insights in mobile search it still holds a tiny proportion of digital advertising revenues versus incumbents like Facebook and Google. The investment case could split investors: the model means Pinterest could emerge as the competition in online advertising that the digital duopoly needs, but many won’t fancy its chances against such formidable competition. However, its older user base (the majority is thought to be mothers) could provide it with a USP.
Rackspace IPO ($10 billion)
Rackspace is a managed cloud computing company that may be familiar to investors. The company launched an IPO in 2008 and became a formidable player in a growing industry but it eventually started to succumb to the growing dominance of Amazon Web Services and Microsoft Azure. That prompted it to focus on providing managed services of these more popular platforms rather than its own.
Read more about the top 10 cloud tech stocks to watch
Its shares gradually declined and presented an opportunity for private equity firm Apollo Global Management to buy the firm for $4.3 billion in 2016. Rackspace was profitable and still growing before being taken private but couldn’t keep up with the stellar results being delivered by the competition. Reports that its performance has improved over the last couple of years and the growing hype over cloud computing could see a return to the market at a higher valuation.
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Slack IPO ($7.1 billion)
Slack has big ambitions for its workplace messaging app to one day replace emails. The platform integrates team messaging with other services like cloud storage and other collaboration tools and has over eight million daily active users. Although the majority use its free service, it has over three million paying users, including big name institutions like IBM, eBay, Samsung and Oracle.
Slack is one of the more likely IPOs this year, with reports that the company plans to list in the second quarter. However, it is also expected to go public via a direct listing that only raises money for existing shareholders and not the company itself.
Revenue is thought to be doubling each year and, in August 2017, it reported annual recurring revenue of $200 million. That means Slack is another firm seeking a premium valuation by tapping into the growth story, reputable customers and big-name backers like Softbank’s Vision Fund, Accel Partners and Andreessen Horowitz. However, it is also reported to be considering a direct listing (see Airbnb above).
Robinhood IPO ($5.6 billion)
Robinhood has been open about its plans to launch an IPO. The firm originally started as a stock trading app but it has since expanded into other services, with cryptocurrencies proving particularly popular. Rather than charge its five million plus users to trade the company instead makes money by charging interest on funds held in accounts, through a premium subscription service and by providing liquidity to stock exchanges looking to create more fluid markets.
Any IPO will be later rather than sooner and part of a wider plan to become a 'full-service financial services company over the next couple of years'. Securing the support of financial regulators, particularly as scepticism over cryptocurrency trading remains high, could be the biggest barrier to getting the company ready for a public listing.
Levi Strauss IPO ($5 billion)
Levi Strauss is one of the first to have made the move to list in 2019. The world-renowned jeans maker is expected to raise between $600 million to $800 million, but this has not been confirmed. The business was listed for 13 years before being taken private for $1.7 billion in 1984, after a period of decline.
Levi’s has improved its performance dramatically and debt has been but by more than half in the last couple of years, and now it is looking to capitalise. Revenue in the year to the end of November 2018 grew 14% to $5.6 billion with net income edging up 0.6% to $283.1 million.
Retail, particularly fashion, is one of the most challenging industries at present with bricks-and-mortar losing to online competition, which in turn has started to show signs of saturation. Levi’s has 2,900 stores but mainly sells through 50,00 partners across the world, with just 10% of its business thought to be online. Levi’s believes the omni-channel retail opportunity and room for expansion in the likes of Asia provide it with plenty of chances to grow.
Peloton Interactive IPO ($4.2 billion)
Peloton Interactive raised $550 million in August to earn the current rumoured valuation and said it was the last financing round before launching an IPO. The company’s web-connected fitness equipment aims to revolutionise the home gym and is spearheaded by its fitness bike that can stream exercise classes and other content to users. This means it makes money through selling the products and from subscriptions to content, such as virtual spin classes.
An IPO will be used as a springboard to expand into new countries and to launch new products, led by a digitally-savvy treadmill. Peloton has said it is already profitable with annual revenue of around $700 million but it has warned its growth plans will mean it will suffer losses in the future.
Cloudflare IPO ($3.5 billion)
Reports suggest Cloudflare could go public in the first half of next year. The company’s cloud-based software is known for making internet content load faster and claims the average internet user interacts with its service up to 500 times in a single day. It also provides other services like cyber security.
It serves over ten million websites and has big name clients like Cisco on the books and reputable investors including Alphabet, Microsoft, Baidu and Qualcomm.
Top upcoming IPOs in the UK
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The year 2018 was not good for the London IPO market. Only 51 companies went public last year raising a total of $8.5 billion, down 35% and 48%, respectively. That has seen London slip down the rankings in terms of volume both volume and value.
Much of this boils down to Brexit, with companies reluctant to enter a market at a time when investors are nervous. The fact Germany’s Deutsche Borse has overtaken the UK in terms of the amount raised through IPOs in 2018 is evidence that activity in the UK has slowed while accelerating in Germany.
O2 IPO (£10 billion)
O2 is one of the largest mobile carriers in the UK and part of Spain’s Telefonica Group. An IPO has been in the pipeline for years and was expected to follow soon after the recent 5G spectrum auctions held in 2018, but the company said in October that it has delayed the listing further to wait for better conditions. The poor performances of some high-profile listings twinned with Brexit uncertainty means O2 is considered one of the less-likely IPOs of 2019, but it would likely be the biggest if it does pull the trigger.
The company is expected to raise considerable sums under any listing, partly to reduce £35 billion worth of debt and to fund the costly venture into 5G. That makes the timing of the IPO even more important.
Dangote Cement IPO (£9-£10 billion)
Dangote Cement is a Nigerian company owned by Africa’s richest man, Aliko Dangote, who said in 2018 that he was looking to sell off a stake in the cement business through a London IPO in the latter half of 2019, allowing time for general elections in Nigeria to pass. Dangote recently revealed he planned to list shares in September. The valuation is based on the 15% of its shares already trading in Lagos. It is not yet known how much of the company will be floated nor at what price.
The business has grown into the country’s largest cement maker but says it now needs to expand through acquisitions rather than the organic investment it has largely relied upon thus far. It is opening a 650,000 barrel-per-day oil refinery in Lagos in early 2020. Bloomberg recently reported the company is in talks about a potential acquisition of a company with operations in Kenya and Tanzania. It is thought Dangote Cement is looking to expand into new territories in areas like the Americas.
Deliveroo IPO (£4 billion)
The food delivery startup has hinted and later reverted on plans to launch an IPO with its CEO stating in May that a listing was off the table, but many consider it to be an option after short-lived talks about a merger with Uber collapsed.
Deliveroo’s last funding round valued the firm at $2 billion but, after the figure was bandied-about during merger talks, it is reported to be demanding a valuation twice that size. Reports it is currently looking to raise further venture capital at a $4 billion valuation suggests that an IPO could be off the menu, for now. Deliveroo will likely be keeping an eye on how competition like Uber makes progress with an IPO.
Read about what Just Eat and Deliveroo have got on the takeaway menu
McLaren Group IPO (£2.5 billion+)
McLaren Group, the British Formula One firm and sports car maker, has been linked to an IPO since as far back as 2011 but is one of the least likely listings next year. The head of its automotive division, Mike Flewitt, said a floatation was off the table in the middle of 2018 and Aston Martin’s listing is unlikely to have convinced the firm otherwise.
Read more about Aston Martin’s IPO
The environment for car makers couldn’t be much worse at present: Brexit threatens supply chains and trade wars are raising the cost of doing business – all at a time when investor appetite for stocks is waning.
Jaguar Land Rover IPO (£2 billon+)
This is likely to put off another car giant. Jaguar Land Rover is part of India’s Tata Motors Ltd - ADR and long been rumoured to be considering an IPO, but optimism has dwindled since peer Volvo, owned by Chinese firm Geely, pulled out of its own listing plans in 2018 as the spat between the US and China escalated.
Tata Motors shares experienced their biggest fall on the Bombay Stock Exchange for 26 years in February 2019 after announcing a £3.1 billion writedown of its investment in Jaguar Land Rover. Brexit, declining diesel sales and a drop in Chinese demand all mean an IPO is off the table for Jaguar Land Rover for now.
Vue Cinemas IPO (£1.6 billion)
Vue is the biggest cinema chain in the UK and also operates in Italy, Poland and Germany. It was among the favourites to list in 2018 but reports emerged that shareholders had pushed back its plans after finding a way of cashing-in on their investment while keeping the company private.
An IPO is still on the table but not seen as necessary now. The company has expanded internationally through acquisition without needing money from public markets, but its investments and growth could demand more funds.
Read about Netflix vs Disney vs AT&T's battle for video streaming supremacy
Finablr IPO (£1 billion+)
Finablr is a payments and foreign exchange company from the United Arab Emirates (UAE) that includes brands like Travelex Holdings and Xpress Money. It is thought the company is looking to float 30% of the business to raise money to fund acquisitions and for further expansion. In November, Reuters reported JPMorgan and Barclays had been hired to co-ordinate the listing in the first half of 2019.
The company has ambitions that could require funding. It manages nearly $100 billion in volumes for its clients over 160 countries and said in 2017 that it was looking to have over 10% of the global remittance market by 2020 from just 6.75% at the time.
Read more on how UK fintech companies continue to lead the way
Eaton Towers IPO (£1.5 billion+)
Eaton Towers was rumoured to be preparing to launch an IPO in early 2018 at a valuation of around £1.5 billion before reportedly delaying it until 2019 in the hope it could secure a higher valuation in more favourable market conditions.
The company owns over 5000 towers across five African markets – Kenya, Uganda, Ghana, Niger and Burkina Faso – and is expected to seek a majority listing in London supplemented by a float in Johannesburg too. The increased infrastructure needs of 5G technology, the popularity of mobile communications in Africa over fixed-line and the performances of other listed tower companies like American Tower and China Tower have all fuelled talks that Eaton Towers could list this year.
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Aurum Holdings IPO (£600 million)
Aurum Holdings, the owner of jewellery retailer Goldsmiths and other brands including Watches of Switzerland and lower-priced online store WatchShop, is reported to have pencilled in an IPO for 2019 since the middle of this year. However, it is still unclear whether London will be the destination of choice with Zurich also a contender. The firm is currently owned by Apollo Global Management (see Rackspace).
The company has won applause for a successful move into the US through the $100 million acquisition of Mayors Jewelers and for its role in the UK watch industry - it is thought to have over one-third of the luxury watch market and account for almost half of all Rolex sales in the country.
The company has said that it has benefited from the fall in sterling since Brexit, helping entice foreign buyers eager to buy luxury watches at a cheaper price. Depending on how the first three months of 2019 pan out Brexit could accelerate or halt plans to launch an IPO.
Other upcoming IPOs in 2019 worth watching
There are some other IPOs to watch out for in 2019. This includes:
- US firm Beyond Meat which makes plant-based substitutes for meat
- Chinese dockless bike-sharing company Mobike
- US legalised cannabis delivery firm eaze
- logistics company Postmates
- US cybersecurity outfit CrowdStrike
How did IPOs perform in 2018?
2018 was a year of growing uncertainty for businesses around the globe, much of which has persisted this year. The US-China trade war is at the forefront of rising tensions while Europe and the UK are both staring into the unknown amid Brexit.
Read more on whether 2019 will be a good year for IPOs
Against this backdrop, there were fewer but larger IPOs in 2018. The number of global IPOs launched last year was down 21% to 1359 but they collectively raised 6% more in proceeds totalling $204.8 billion.1
Top IPO destinations in 2018
| IPO Location | Number of IPOs | Year-on-Year (YoY) change | Proceeds ($, b) | YoY change |
|---|---|---|---|---|
| US | 205 | 14% | 52.8 | 31% |
| EMEIA | 432 | -16% | 47.7 | -26% |
| Hong Kong | 197 | 24% | 35.4 | 120% |
| Continental Europe | 179 | -9% | 30.2 | -5% |
| Japan | 97 | 2% | 26.4 | 333% |
| Mainland China | 105 | -76% | 21.2 | -38% |
| UK and Ireland | 52 | -33% | 8.6 | -42% |
| ASEAN | 115 | -7% | 7.1 | -34% |
| Oceania | 85 | -11% | 5 | 129% |
| Canada | 38 | 31% | 1.3 | -55% |
Some companies that had long been rumoured to launch an IPO finally joined the market in 2018, including firms like file-sharing service Dropbox, electronic signature company DocuSign and ticketing site Eventbrite. Speaker maker Sonos and fintech firm Ayden were other big names to go public in the USin 2018. Meanwhile, London welcomed the likes of luxury carmaker Aston Martin and peer-to-peer lender Funding Circle.
Overall, it was a weak end to the year with the number of IPOs down 34% year-on-year in the final quarter of 2018, with proceeds down 10%. However, there were some major additions to global stock exchanges late in the year, including Softbank’s $21.1 billion listing in Japan, Knorr-Bremse’s $4.4 billion listing in Germany, and Tencent Music’s $1.4 billion offer in New York.
Sources:
1 EY Global Q3 IPO Market Report
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