Tech Startups Stoke Market for IPOs
Tech Startups Stoke Market for IPOs
After years of staying out of the stock market, several highly valued Silicon Valley technology companies are now preparing to go public next year.
Among the candidates for OPI are the travel companies Uber Technologies Inc. and Lyft Inc., and the data mining specialist Palantir Technologies Inc.
If they continue, 2019 could be a record year for the IPOs in terms of dollars raised. It could surpass 2000, the highest level, when technology companies rushed to capitalize on high valuations at the peak of the dot-com boom.
The Wall Street Journal reported this week that Uber, which is targeting a possible list of early 2019, could be valued at up to $ 120 billion. If you increase the typical amount for a company of that size, your OPI earnings could reach $ 25 billion.
That's more than half of the $ 44.5 billion raised by all technology companies in the United States exchanges combined in 2000, according to Dealogic. It would also make the pioneer in travel sharing the largest company to debut from
Alibaba Holding Group
Limited.
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went public in 2014.
Palantir, a data mining specialist co-founded by famed investor Peter Thiel, could debut next year or in 2020 with a valuation that could reach $ 41 billion, the Journal reported Thursday. People familiar with their plans warn that they remain in motion, and that investment bankers often exaggerate the projected IPO values to win business.
Palantir, founded in 2004, has remained private for so long that employees find it difficult to take out private provisions. That has contributed to the decisions of some employees to leave, said people familiar with the matter.
Lyft is considering an inclusion early in 2019 that could value Uber's main rival in the US. UU With more than $ 15 billion, the Journal reported this week.
According to people familiar with the subject, among other large technology companies in the OPI queue of 2019 include the message platform for the workplace Slack Technologies Inc., as well as a series of smaller companies but closely monitored, among them the food delivery service Postmates Inc., the security companies CrowdStrike Inc. and Cloudflare Inc., and the provider of videoconferencing software Zoom Video Communications Inc.
Other large private companies that have not decided the time of the IPO, but could potentially debut next year include Airbnb Inc. and Pinterest Inc., along with a number of heavyweights of Chinese technology, such as the transportation company of vehicles Didi Chuxing Technology Co. and Ant Financial Services Group, an affiliate of Alibaba that was valued at $ 150 billion earlier this year.
All this is a drastic change for companies that, for years, had a large cash supply from private sources and chose to build their businesses away from the prying eyes of investors and public analysts.
That capital has not dried up, but these companies are now reconsidering their aversions to public markets, attracted by the prices of shares above the sky and the opportunity to establish a liquid market for their shares.
For average investors, it could mean that they can finally bet on companies like Uber that have become part of their daily lives but have been out of reach, even when their estimated values skyrocketed.
According to bankers and lawyers, helping to explain the rush to public markets is a fear of executives that if they wait another year they could run the risk of missing a window that will eventually close. In fact, there is no guarantee that any of the companies that plan to debut next year or in 2020 will manage to do so, since the IPO market is notoriously volatile and sensitive to the market and economic health.
In addition to the risk of the economy slowing down, the demand for new public companies may decrease with an avalanche of newly issued shares. The popularity of large public technology companies has faltered in the last trading sessions, which highlights the risk for those who hope to take advantage of the wave of demand for technology-OPI.
The euphoria could also be seen as a sign of a market summit, as in 2000.
However, the current crop of technology IPO candidates is nothing like the dot-com boom, when emerging companies sometimes only had months to collect relatively small amounts. In the year 2000, according to the startup research tracker Dow Jones VentureSource, 213 new companies backed by venture capital had IPOs, raising around $ 20 billion.
As recently as last year, bankers, investors and startup executives questioned whether companies like Uber could meet their private prices in public markets. Now, many bankers are telling these companies that public markets will probably value them well above those levels.
Uber was valued at $ 76 billion in a round of private funding earlier this year, well below what bankers now say they could get in an IPO.
According to people familiar with the discussions, other private companies, such as Lyft and Cloudflare, are told to expect ratings that far exceed their last private rounds in an IPO.
"If your company is running well, what else could you expect?" Said Mark Hantho, president of global investment banking and capital markets at Deutsche Bank AG. He added that many of the larger private companies still have great growth potential, but will eventually decline.
Investors have swallowed the shares of public companies recently so far this year, with 201 companies that raised $ 54 billion in US IPOs, including 47 technology issuers that raised $ 17.8 billion, according to Dealogic. That is the maximum for both measures in a similar period from 2014 and more than each year full 2015, 2016 and 2017.
Perhaps more importantly, technology IPOs, the engine of the global market for new problems, have been priced at an average of 9% over their proposed ranges, according to Dealogic. Even after that, the average technology company shot up 28% on its first day of operations.
According to a signal that companies are optimistic about the trajectories after the IPO of their shares, many have been hoping to sell more shares later at higher prices, according to bankers and analysts. According to Dealogic, technology companies have sold the smallest proportion of their shares in IPO, approximately 17%, so far this year.
When the new public technology companies return to the market to raise additional cash, they are finding eager buyers. The technology issuers have raised more than $ 21 billion through follow-up offers so far this year, on track to be the most collected by this type of agreement since 2000.
In another sign of exuberance, investors are overlooking high valuations and miserable profits, or zero, to have an opportunity to obtain huge returns. According to the data compiled by University of Florida finance professor Jay Ritter, in the first three quarters of the year, four fifths of all the IPOs listed in the United States were companies that lost money in the previous 12 months. That is the largest proportion in the registry.
Write to Maureen Farrell in maureen.farrell@wsj.com, Rob Copeland in rob.copeland@wsj.com and Corrie Driebusch in corrie.driebusch@wsj.com
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