A wave of high-profile listings are expected to hit the markets in 2020, but which of these stocks will dominate the IPO space? We take a look at the top UK, US and international IPO contenders for the months to come.
Best upcoming UK IPOs to watch
- O2 (estimated market cap: £10 billion)
- Dangote Cement (estimated market cap: £10 billion)
- Asda (estimated market cap: £8 billion)
- SDIC Power (estimated market cap: $10 billion)
- Deliveroo (estimated market cap: £3.2 billion)
- McLaren Group (estimated market cap: £2.5 billion)
- Jaguar Land Rover (estimated market cap: £2 billion)
- Vue International (estimated market cap: £1.6 billion)1
The year 2019 was a mixed year for the London initial public offering (IPO) market. There were fewer listings than in 2018, but valuations and share prices have generally been higher. Much of this boils down to Brexit, with companies reluctant to enter the market at a time when investors are nervous.
However, with the UK expected to leave the EU by the end of January 2020, the IPO landscape might change. Let’s explore some of the 2020 listings to watch.
O2 (estimated market cap: £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 5G spectrum auctions held in 2018.
However, the company decided to delay the listing due to uncertainty surrounding Brexit and the poor performance of some high-profile listings. The company is expected to raise considerable sums under an IPO, partly to reduce £35 billion worth of debt and to fund the costly venture into 5G.
Dangote Cement (estimated market cap: £10 billion)
Dangote Cement is a Nigerian company owned by Africa’s richest man, Aliko Dangote. He said in 2018 that he was looking to sell off a stake in the cement business through a London IPO after the general elections in Nigeria. 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 relied upon thus far.
Asda (estimated market cap: £8 billion)
Retail giant Walmart is strongly considering an IPO of Asda, one of its subsidiaries, following the collapse of a proposed Sainsbury’s deal. Its focus will be on customer value and experience in the next few years, in an effort to differentiate itself from competitors such as Aldi and Lidl.
The listing would give Asda the opportunity to pursue its own strategy while retaining access to Walmart’s buying power. No exact date has been set for the IPO, but it has been reported that Asda could be valued at up to £8 billion.
SDIC Power (estimated market cap: $10 billion)
Chinese energy firm SDIC Power is heating up for a 2020 London IPO. SDIC invests in, constructs and operates electric power plants. It also works on alternative energy solutions, such as hydropower.
Reports state that the business wants to raise up to $1 billion from selling 10% of its share capital as Global Depositary Receipts on the London Stock Exchange.
Deliveroo (estimated market cap: £3.2 billion)
Deliveroo is a food-delivery startup headquartered in the UK, with operations across the world. It has hinted at a 2020 IPO after short-lived talks about a merger with Uber collapsed.
Deliveroo’s last funding round valued the firm at £1.6 billion (in 2018). Its most recent investment – £459 million from Amazon – may have given the business the momentum it needs to reach its new valuation target of £3.2 billion. Many reports state that Deliveroo’s focus is on growing the business and reaching new customers, not an IPO specifically.
McLaren Group (estimated market cap: £2.5 billion)
McLaren Group, the British Formula One firm and sports car maker, has been linked to an IPO since 2011.
Following Aston Martin’s listing in 2018, the head of McLaren’s automotive division confirmed that it was not going to follow suit just yet. That’s because the environment for car makers was very volatile with Brexit impacting supply chains and the trade war raising the cost of doing business.
Jaguar Land Rover (estimated market cap: £2 billion)
Jaguar Land Rover (JLR) is part of India’s Tata Motors and long been rumoured to be considering an IPO.
Optimism surrounding the car company’s listing has dwindled as a result of delays to Brexit, declining diesel sales and a drop in Chinese demand. Tata Motors shares experienced their biggest fall on the Bombay Stock Exchange in 26 years after announcing a £3.1 billion write-down of its investment in JLR. It could be that the business is simply waiting for Brexit tensions to ease before pursuing the IPO, which could see JLR valued at up to £2 billion.
Vue International (estimated market cap: £1.6 billion)
Vue International is the biggest cinema chain operating from the United Kingdom. It has 286 cinemas across countries including the UK, Italy, Poland, Germany, Ireland and Latvia. It has managed to delay its rumoured 2018 IPO after finding a way of cashing in on its investments while keeping the company private.
Further, it has expanded internationally without needing money from public markets, but its investments and growth could demand more funds. According to Vue, the group is aiming for a listing of around £1.6 billion.
Best upcoming US IPOs to watch
- Palantir (estimated market cap: $41 billion)
- Airbnb (estimated market cap: $38 billion)
- Rackspace (estimated market cap: $10 billion)
- Instacart (estimated market cap: $8 billion)
- Robinhood (estimated market cap: $5.6 billion)
- Postmates (estimated market cap: $2 billion)
- Casper (estimated market cap: $1.1 billion)
- Eaze (estimated market cap: $500 million)1
The US has remained the most popular destination for IPOs in 2019, and its listings have also raised the most money. This was despite lower investor interest in high-risk, high-growth stocks. It is expected that this IPO market will gain speed in 2020, especially ahead of the US elections in November of the same year. Let’s explore some of the 2020 listings to watch.
Palantir (estimated market cap: $41 billion)
Data-mining company Palantir, co-founded by Peter Thiel, is reported to be plotting an IPO in 2020. Palantir has earned a reputation for being highly secretive but it is known to be one of the biggest players in big data.
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, the company’s growth story may have investors singing a different tune.
Airbnb (estimated market cap: $38 billion)
Airbnb is an online booking space for accommodation, primarily based on the principle of home sharing. It has confirmed that it is ready to go ahead with a 2020 IPO.
According to internal valuations, Airbnb is likely to be valued at around $38 billion when it lists. However, this figure may not reflect the true value of Airbnb stock to the customer, as there has been a lot of media hype surrounding the IPO. If the listing is confirmed at this valuation, Airbnb will have one of the largest market caps in the travel industry.
Rackspace (estimated market cap: $10 billion)
Rackspace is a managed cloud computing company that launched an IPO in 2008 and became a formidable player in a growing industry.
Eventually, it started to succumb to the growing dominance of Amazon and Microsoft. Shares gradually declined and the company was bought by Apollo Global Management in 2016. Now, reports are stating that Rackspace’s performance has improved enough for it to return to the market with a valuation of $10 billion.
Instacart (estimated market cap: $8 billion)
Instacart is a grocery-delivery service, founded in 2012, which is currently valued at around $8 billion. One of its biggest partners, Whole Foods, was acquired by Amazon a few years ago, which made some people wary of the business’s future.
However, Instacart has grown to service 15,000 stores across 4000 cities in the US. Though it does not disclose its revenue or profit, its national presence does attest to its ongoing success. The company’s focus for the upcoming months will be to find new ways to appeal to customers.
Robinhood (estimated market cap: $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.
Any IPO will be part of a wider plan to become a full-service finance company over the next couple of years. Securing the support of investors, particularly as skepticism over cryptocurrency trading remains high, could be the biggest barrier to getting the company ready for a public listing.
Postmates (estimated market cap: $2 billion)
Originally expected to list in 2019, delivery services company Postmates has delayed its IPO due to shaky market conditions.
Its chief executive officer (CEO) revealed that the company is keeping a close eye on the economy and the performance of other high-profile IPOs before making a decision. Uber and Lyft, among others, have all performed poorly since listing – despite sky-high market valuations. Postmates is expected to list on the New York Stock Exchange with a valuation of more than $2 billion.
Casper (estimated market cap: $1.1 billion)
Mattress company Casper only started in 2014 but it is already gearing up for a possible IPO, which could see it valued at $1 billion or more.
So far, Casper has raised more than $340 million in funding in the run-up to its initial public offering. Further, it has shown very strong performance over the past few years and it reported revenue growth. This is mostly due to the high-profile support the company has received from celebrities and other businesses. The aim of the upcoming IPO is to fund Casper’s expansion and increase the number of storefronts.
Eaze (estimated market cap: $500 million)
Speculation surrounding an Eaze IPO has been rife since 2018, but the marijuana delivery service might finally list its stocks in 2020. Of course, the possibility has sparked a lot of interest among traders and investors – especially following the major expansion of the cannabis industry over the past three years.
Eaze predicted it would achieve $1 billion in revenue by 2020, but it’s yet to reach $500 million in transactional value. This could have an impact on the date as well as the final valuation of the IPO. Over the longer term, Eaze’s success will depend on its ability to keep up with the fast-changing cannabis and tech landscape.
Best upcoming international IPOs to watch
Saudi Aramco (estimated market cap: $2 trillion)
Saudi Aramco is the world’s largest oil and gas company, based on both revenues and profit.
The corporation produces around ten million barrels of crude oil per day, which accounts for 15% of the world’s oil supply. Saudi Aramco’s listing, said to be valued at up to $2 trillion, is expected to overshadow every IPO in history. The final figure will depend on the outlook for oil prices, as well as Saudi oil production and exports.
TowerCo (estimated market cap: €20 billion)
TowerCo has more than 61,000 mobile towers, across 10 countries, connected to its business.
The company is seeking an IPO as part of Vodafone’s plans to monetise its tower assets. Vodafone could make billions from the listing, which it needs to pay off debt. Vodafone has not released much information about the listing, but it has been rumoured that the valuation could be up to €20 billion. The outlook for TowerCo is positive as Vodafone has projected €1.7 billion in annual revenue for its tower business.
Barbeque Nation Hospitality (estimated market cap: ₹24 billion)
Barbeque Nation Hospitality, launched in 2005, owns one of India’s biggest restaurant chains. Besides being a big name in the country, it also has a presence in the UAE, Oman and Malaysia.
An IPO of approximately ₹24 billion (roughly £260 million) is expected in 2020, with the funds raised said to be used to build new restaurants, repay debts and fund general operations. The share price has been rumoured to float at ₹10.
Uber (market cap: $69.7 billion)
Uber, a ride-hailing company founded in 2009, listed on the New York Stock Exchange in May 2019, with a valuation of more than $69.7 billion.
Shares floated at $45 but were down by more than 7% at the end of the first trading day. The company remains positive about its future success – citing the role of its smart technology to further its offering.
Lyft (market cap: $22 billion)
Lyft – one of Uber’s taxi-app rivals – listed on the New York Stock Exchange in March 2019, with a final valuation of just over $22 billion.
Shares floated at $72 and closed the first trading day at $78.29. The Lyft share price has not performed very well since the listing, but the company is said to have benefited from the reputational damage that Uber has suffered.
Slack (market cap: $19.5 billion)
Slack is a software company that opted for a direct listing on the New York Stock Exchange in June 2019, reaching a final valuation of $19.5 billion. Shares opened at $38.50 and closed slightly higher at $38.62. Slack faces a lot of competition from companies such as Microsoft and Facebook, causing the share price to decline by roughly 47% from June 2019 to November 2019.
Peloton (market cap: $7.7 billion)
Exercise equipment maker and media business Peloton listed on the Nasdaq (US Tech 100 with IG) in September 2019, with a valuation of $7.7 billion.
Shares floated at $27 a piece but were down by about 7% at the end of the first trading day. Peloton is working on expanding its offering in the US and UK and will also be launching in Germany.
Cloudflare (market cap: $5.2 billion)
Cloudflare listed on the New York Stock Exchange in September 2019. The company’s cloud-based software is known for making internet content load faster. It also provides other services such as cyber security.
Its first trading day was quite successful after shares reached a high of $19.53 and closed 19% higher than its opening price of $15.
Virgin Galactic (market cap: $2 billion)
Virgin Galactic is a space flight company linked to the Virgin Group. It listed on the New York Stock Exchange in October 2019, but not through a traditional IPO.
It merged with shell company Social Capital Hedosophia Holdings Corp, with the deal having an equity value of approximately $2 billion. The stock lost 21% of its value on the first trading day, closing at $9.35 a share.
Trainline (market cap: £2 billion)
One of the largest coach and rail platforms in the UK and Europe, Trainline, listed on the London Stock Exchange (LSE) in June 2019, reaching a valuation of roughly £2 billion. Shares floated at 350p but rose by about 18% by the end of the first trading day. As a next step, Trainline plans to increase its presence across Europe, after which it may want to consider other travel industry verticals.
How to trade an IPO
There are two ways to trade and IPO – before the listing, and after the listing.
Before the IPO
If there is a lot of interest in a particular IPO, IG may offer a ‘grey market’ before such IPO is held. This means you can speculate on a company’s share price before it lists. The grey market price will be based on our prediction of the company’s market capitalisation at the end of the first trading day.
With a grey market, you would:
- ‘Buy’ if you think the market cap will be higher than the grey market price
- ‘Sell’ if you think the market cap will be lower than the grey market price
After the IPO
Once the company has listed, there are many ways you can attempt to profit from the IPO. As with all stock markets, you will be able to:
- Go long or short on shares by CFD trading
- Buy and own shares via share trading
Ready to get started? Open a live IG trading account
How long is the IPO process?
The length of the IPO process can vary, depending on how well it’s being managed and coordinated. The first step is a financial audit of the company, which can be the longest part of the process – especially if the company’s books are not in order.
The business then has to prepare a registration statement to file with the appropriate exchange commission. Next, the stock exchange reviews the application, which can be approved quickly if it has no concerns. A well-managed IPO could take up to 12 months, but it could be longer.
How do I find new IPO stocks?
To find new IPO stocks, you can sign up to our IPO mailing list. This list will update you on any changes and expected IPOs.
How much does an IPO cost?
The cost of an IPO depends on the registration requirements of the company and the stock exchange. Any company wanting to list on a stock exchange has to carry the cost of an IPO – no costs are carried by the individual trader or investor who may be interested in the stock. Generally, there will be an underwriting fee and offering costs, as well as legal and accounting fees. Larger companies could face additional costs when preparing to list.
How is the IPO price calculated?
The IPO price is calculated by an investment bank. First, the company decides how many of its shares it wants to sell to the public. Then, the nominated investment bank does a thorough valuation of the business. Once that’s done, an initial share price is released, and the public can start trading shares when the listing happens.
1 Final IPO valuations are established on the first trading day.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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