Calendar 2018 was a big year for initial public offerings, or IPOs. The number of IPOs in 2018 rose more than 20% year-over-year to nearly 230, the highest mark since 2014 and the third highest mark over the past ten years.
Yet, there’s reason to believe that 2018 was just the beginning of a multi-year IPO boom. Here’s the thing about the IPO market: it runs in cycles. Multiple consecutive years of low IPO volume are followed by multiple consecutive years of high IPO volume. From 2015 to 2017, we had three years of below-average IPO volume. Calendar 2018 broke that trend with 200-plus IPOs. History tells us that 2019 and 2020 should be more of the same.
Indeed, calendar 2019 should be one for the record books in the IPO market. The list of potential 2019 IPOs is long, diverse, and includes some of the biggest and fastest growing private companies. Those companies promise to make an unforgettable splash when they go public later this year.
More than that, I think many of these IPOs will be extremely successful. The batch of companies going public this year include the batch of companies that were birthed out of the Financial Crisis a decade ago. They are disruptive and innovative, and cut from a different cloth than current public companies. Most importantly, most of these companies are employing coordinated economic principles to give power back to the people, and in so doing, are aligned with the biggest trend of the century.
As such, not only does the 2019 IPO market project to be one for the record books, but it should also yield some big winners. With that in mind, let’s take a look at a list of seven IPOs that investors should be excited for in 2019.
At the head of this list is Uber, the ride-sharing company which has already entirely disrupted the transportation industry.
Investors should be excited about the Uber IPO because this company has truly optimized transportation services, and in so doing, has established a massive driver base which will be hard for anyone else to replicate, and from which multiple valuable business opportunities can be created. In a nutshell, Uber is the quintessential coordinator. Before Uber, transportation services were performed by the few (namely, taxis). Uber democratized the supply of transportation services, and said anyone with a car can now perform this service, creating a surge in supply. Uber coordinated that supply, so that it would satisfy demand-side expectations. Net result? Supply caught up to robust demand, price points fell, and convenience went up. Uber won.
Now, Uber has a driver base that numbers several million globally. Uber can use that unparalleled driver base to optimize price and convenience in other transportation-related industries, such as delivery and last-mile logistics. The sum potential of all these industries numbers in the hundreds of billions of dollars, and potentially even in the trillion dollar range if Uber wins the race to self-driving. As such, while Uber’s rumored $120 billion IPO valuation may drop some jaws, it’s worth it.
Uber isn’t the only ride-sharing company going public in 2019. In fact, before Uber ever hits public markets, its competitor Lyft should have already spent a few months on Wall Street.
Lyft is planning to launch its IPO roadshow in mid-March. That means that by the summer of 2019, Lyft should be a publicly traded company. That’s exciting news. Much like Uber, Lyft is a quintessential coordinator who has helped democratize and coordinate supply in the transportation industry to meet robust demand. In so doing, Lyft has huge opportunities in front it to not only become a solid second player in the ride-sharing market, but also the number one or number two company in a plethora of other transportation-related markets.
The attractive thing about the Lyft IPO is that the valuation is rumored to be under $25 billion. That is just a fraction of Uber’s valuation. To be sure, Uber is much bigger than Lyft in terms of total revenues and rides. But, Lyft is supposedly growing much more quickly than Uber, and the company has largely avoided negative press (much unlike Uber). Consequently, investors should be excited about the upcoming Lyft IPO, given its discounted valuation relative to Uber and that the company is apparently gaining share in ride-sharing.
The coordinated economy hasn’t just hit the transportation industry. It has also hit the accommodations industry, thanks to Airbnb, who also projects to go public in 2019.
Much like Uber, Airbnb has become a quintessential coordinator. Before, accommodation services were provided by the few (namely, hotels). Airbnb democratized supply in that market, and said that anyone who has an extra room or living space can rent it out for accommodation purposes. Supply surged. Airbnb coordinated that supply to satisfy demand-side expectations. Consequently, supply caught up to demand, prices fell, and convenience rose.
Much unlike Uber, however, Airbnb doesn’t have any big second competitor that is also set to IPO in 2019. Thus, the competition landscape for Airbnb is quite attractive for the foreseeable future. Also, Airbnb is in an optimal position to jump into other accommodation-related industries, like the travel and car rental industries, meaning the long term opportunity here is quite large.
Following in the footsteps of Uber, Postmates took those same coordinated economy principles and applied them specifically to the delivery process.
While you may be inclined to compare Postmates to food-delivery services including UberEats and GrubHub (NYSE:GRUB), that’s not entirely accurate. Postmates will also deliver items from local stores such as groceries, alcohol, and other items–making for a nice moat. (Though for these other items, they may eventually have to compete with the likes of Amazon (NASDAQ:AMZN), which is no joke for any company, but for now, same-day delivery isn’t widespread and it isn’t under an hour or so wait time.) But the (prepared) food-delivery market will be really big one day (like $100 billion-plus big), and Postmates is maintaining steady double-digit market share. Plus, the current valuation on Postmates is reasonable ($1.85 billion).
Thus, in the big picture, Postmates is a solid growth company in a big growth industry. There’s some competition, but the valuation reflects those competitive risks, and is actually quite attractive considering the market growth potential. As such, the Postmates IPO is one to watch for later this year.
The last big social media app to IPO was Snap (NYSE:SNAP). That didn’t go too well. But, there’s reason to believe that the next big social media app to IPO, Pinterest, will have a different outcome.
Snap struggled for three reasons. The user base fell flat, engagement proved difficult to monetize, and margins were weak. Pinterest won’t have those problems. The platform has about 250 million monthly active users, and is growing that base at a fairly consistent 50 million new users per year. Also, given Pinterest’s curation focus, data indicates that engagement on the platform can be very easily monetized, as consumers are already using Pins to influence purchasing behavior. Perhaps most importantly, Pintrest’s gross margins are north of 45%.
All in all, Pinterest looks positioned for big success on Wall Street. User growth is healthy. Engagement is easily monetized. Margins are high. There’s a lot to like here, meaning that Pinterest stock will likely have a much better start on Wall Street than Snap stock.
Pinterest filed for IPO at the end of last week, seeking a valuation of at least $12 billion.
If you thought social networking was exclusive to the personal level, think again. Enterprise social networking, or ESN, is a rapidly expanding industry, and at the heart of all that growth is Slack, yet another company set to IPO in 2019.
One aspect of the cloud tech boom is the growing demand for enterprise cloud solutions tailored to addressing intra-business communication and workflow needs. ESN is the market which addresses those needs, as it includes a portfolio of platforms which allow for seamless intra-business communication and workflow sharing. The most popular of those platforms is Slack, which has gone from 365,000 daily active users to 10 million daily active users in just four years. Indeed, some say Slack is the fastest growing software-as-a-service (SaaS) company ever.
Going forward, there are two important things to note here. One, demand in the ESN space will only continue to grow. Two, Slack has beaten out competition from Facebook (NASDAQ:FB) in this space. As such, Slack has a proven ability to beat top-quality competition in a big growth market. That positions the company for robust growth for a lot longer, which roughly translates into Slack stock doing well on Wall Street.
Peter Thiel is an important and impressive guy. He co-founded PayPal (NASDAQ:PYPL), and was the first major outside investor at Facebook. Now, his latest venture, Palantir (which Thiel founded in 2003), is set to go public in 2019.
At its core, Palantir provides solutions which enable companies of all sizes to make sense of big data. This is a very important service. Big data is of increasing importance when it comes to enterprise decision making. But, the quality of insights device from big data relies on the quality of analysis done on that big data. That’s where Palantir excels — providing the best of the best analysis on such data.
The long-term outlook for Palantir looks good. So long as data becomes increasingly important, Palantir’s services will have growing demand. The only big concern is competition. But, this market projects to be so big one day that it will support multiple players at scale. Consequently, the Palantir IPO should be successful.
As of this writing, Luke Lango was long GRUB, FB, and PYPL.