Upcoming IPOs for 2019

After a lukewarm year for newly-listed companies, we have a look at the top IPO contenders for 2019 and outline the biggest stocks that could go public.

Bank of England Source: Bloomberg

What is an IPO?

An initial public offering (IPO) represents the first time a company sells shares to the public, opening up the business from private ownership and empowering new investors with the right to vote on future decisions. While most companies aim to bring on large institutional shareholders to form the foundations of their shareholder base, public companies tend to have thousands of different investors – big and small.

The main purpose of an IPO is to raise funds for the business to move forward. Businesses going public tend to expect high growth over the coming years and require cash to carry out their strategy. Once completed, the public company becomes much more transparent as it is obliged to abide by the rules and regulations of whatever stock exchange they have chosen to list on, requiring the firm to publish audited financial accounts and keep the market up to date with what is happening with the business. IPOs are also a way for private owners to exit all or part of their investment by selling shares to the public.

Read about the top upcoming IPOs in the US, or you can learn more about the top upcoming UK IPOs here

Fewer companies list in 2018 but raise more money

It has been a year of growing uncertainty for businesses around the globe. The US and China’s battle is at the forefront of rising trade tensions while Europe and the UK are both staring into the unknown, amid Brexit.

Against this backdrop, there has been fewer IPOs this year but the size of them has grown. In the first nine months of 2018, there were 1,000 IPOs globally, down 18% year-on-year, but they collectively raised 9% more at just over $145 billion1.

What did IPOs look like in 2018?

It has been a year of growing uncertainty for businesses around the globe. The US and China’s battle is at the forefront of rising trade tensions while Europe and the UK are both staring into the unknown, amid Brexit.

Against this backdrop, there has been fewer IPOs this year but the size of them has grown. In the first nine months of 2018, there were 1000 IPOs globally, down 18% year-on-year, but they collectively raised 9% more at just over $145 billion.1

Top IPO destinations in the first nine months of 2018

IPOs Year-on-Year (YoY) change Proceeds ($, b) Yoy change
US 157 31% 43.8 57%
EMEIA 325 -11% 33.1 -24%
Hong Kong 153 44% 29.4 162%
Continental Europe 126 -2% 20.2 16%
China 86 -75% 17.8 -31%
ASEAN 77 4% 4.7 -26%
Japan 66 14% 4.6 36%
Oceania 63 -2 4% 271%
UK and Ireland 38 -28% 5.2 -48%
Canada 25 39% 1.0 -53%

Some companies that had long been rumoured to launch an IPO finally joined the market this year, 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 US this year. Meanwhile, London welcomed the likes of luxury carmaker Aston Martin and peer-to-peer lender Funding Circle.

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 continue to fall while the amount being raised continues to rise. The number of ‘unicorns’ – firms that list with a valuation above $1 billion anticipated to come to market is set to rise, led by the three biggest potential IPO candidates: Uber, Lyft and Palantir.

This is partly down to the ability of startups, particularly in tech, to stay private for longer thanks to the flow of private money available. This means there has allowed firms to avoid the scrutiny that comes with funds from the public markets and that they are larger when they do take the plunge. This, twinned with the difficult political and economic landscape, has led numerous IPOs to being cancelled or postponed in 2018, and this could be set to continue in 2019.

Still, tech stocks will continue to dominate the IPO space. Nearly 190 new tech stocks have come to market globally this year, more than any other sector. That's despite the sell-off that has hit the industry in the second half of 2018. The other standout sectors attracting new listings this year are industrials (153), healthcare (128), materials (105) and consumer products (101).

Thirdly, 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.

Read more about the best marijuana stocks to watch

Top upcoming IPOs in the US

The US has remained the most popular destination for IPOs this year, 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 have launched an IPO in the US this year, 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.

Learn more about Trump vs the world as the global trade war heats up

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).

List of the top upcoming IPOs in the US

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. 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.

Read more about the Uber and Deliveroo merger, with Amazon sitting on the sidelines

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.

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 (and is yet to be replaced).

Read more as Airbnb hires new CFO ahead of IPO launch

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 be on course to make $4 billion in annual revenue in 2018 and profitable at the earnings before interest, tax, depreciation and amortisation (Ebitda) level.

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.

Lyft IPO ($15 billion)

Lyft has publicly announced its plans to launch an IPO in the first half of 2019, pipping its larger rival Uber. 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.

Winning the race to launch an IPO first, a more modest valuation and a less-dented reputation could give the company an advantage over its bigger rival.

Learn more about Lyft applying for an IPO

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. Reports suggests revenue this year will hit $1 billion, raising questions about its lofty valuation, but that is expected to have doubled from 2017, and the company’s insights in mobile searches is where the value is being attributed. The most recent financing round in mid-2017 valued the company at $12.3 billion.

The investment case could split investors: the model means Pinterest could emerge as the competition in online advertising that the duopoly of Facebook and Google need, but many won’t fancy its chances against such formidable competition. But 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.

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.

Read more about the top 10 cloud tech stocks to watch

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.

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.

Read more as Robinhood hires CFO before going public

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 (Levi's) is likely to be one of the first companies to list in 2019 with expectations the world-renowned jeans maker will aim to raise between $600 million to $800 million. 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 is looking to capitalise. It reported its fourth consecutive quarter of double-digit revenue growth in October and debt has been cut by over half in the last two to three years.

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.

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

The volume and value of IPOs on London’s AIM and Main Market has plummeted this year. The capital has seen 37 listings raise $5.1 billion this year compared to 78 IPOs raising $14.8 billion last year. That has seen London slip down to ninth in the league table in terms of the amount raised from fourth a year ago1.

The uncertainty over Brexit and fears of more restricted access to European markets as early as next year has no doubt dampened confidence and prompted firms to hold-off their listings, cancel them altogether or choose an alternative destination with more stable outlooks. The fact Germany’s Deutsche Borse has overtaken the UK in terms of the amount raised through IPOs this year is evidence that activity in the UK has slowed while accelerating in Germany.

List of the top upcoming IPOs in the UK

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.

Learn more about investing in 5G

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. That timetable allows general elections in Nigeria to pass early next year. The valuation is based on the 15% of its shares already trading in Lagos.

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 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

McClaren Group IPO (£2.5 billion+)

McClaren 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 Landrover IPO (£2 billon+)

This is likely to put off another car giant. Jaguar Landrover 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.

Read about Jaguar Landrover's £90 million quarterly loss

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.

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.

The company has not confirmed its IPO plans but 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.

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.

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 and US cybersecurity outfit CrowdStrike.

Read more about the latest news on stocks and shares

Sources:

  1. EY Global Q3 IPO Market Report

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