[Editor’s note: This story was originally published in January 2019. It has since been updated and republished.]
The buzz was that 2019 would be one of the biggest years for initial public offerings (IPOs), at least in terms of the amount of capital raised. The main reason: We are likely to see a variety of tech unicorns finally hit the markets.
But unfortunately, there’s a big problem. The partial shutdown of the federal government has meant that there is a skeleton staff at the SEC (Securities and Exchange Commission). When this happens, it means that there can be no IPOs. According to U.S. law, the federal government must approve any offer of securities to the public.
Yet hopefully the shutdown will not last long and that investors will soon get a chance to invest in myriad hot deals. [Ed’s note: The shutdown ended Jan. 25, 2019, lasting a total of 35 days.] Actually, the upcoming “Paul” IPO offerings — including Pinterest, Airbnb, Uber and Lyft — will likely dominate the headlines. The amounts raised will certainly be enormous.
OK, since there are no public filings of the S-1s, the financial data is a bit fuzzy on the Paul stocks (note that some of the filings are confidential, such as from Uber and Lyft). Yet there is still lots of information available, such as from press releases and third-party analyses, to get a sense of these companies.
Here’s a look:
The upcoming Pinterest IPO has not seen much attention. Yet this does not mean it will be a laggard. For the most part, Pinterest has been able to put together a solid business.
Unlike a typical ecommerce platform like Amazon.com (NASDAQ:AMZN) or eBay (NASDAQ:EBAY), Pinterest has made buying highly engaging. The members of the site can pin their favorite items, creating compelling boards. In fact, there are 175 billion pins!
Here are some other notable metrics:
- There are 250 million MAUs (monthly active users).
- 50% of the traffic is outside the U.S. and 80% comes from mobile phones.
- 93% of active pinners use the service to plan for purchases.
So yes, monetization has been strong. For 2018, revenues are estimated to have increased by 50% to $700 million. And as for the valuation of the Pinterest IPO, it is projected at about $12 billion.
Online marketplaces can be very powerful. This is even the case if the technology is not on the cutting-edge. Hey, just look at Craigslist, which continues to be a dominant player in online classified listings. The key is to get to critical mass, in which there emerge network effects. When this happens, an online marketplace can be extremely difficult to unseat.
This appears to be the case with Airbnb. The company has more than 5 million listings across over 190 countries.
The business is also highly lucrative. In the latest quarter, revenues grew by more than $1 billion. It also looks as if the company has been cash-flow positive for the past two years.
Something else to consider: The Airbnb IPO may be unconventional – that is, Airbnb could issue shares directly to the public, avoiding the high fees of investment banks. If so, this means retail investors will have a chance to snag shares at the offering price.
For many startups, the founders will often be overly optimistic about their forecasts. But this was not the case with Uber. If you take a look at the original investor deck, which was created ten years ago, the estimates turned out to be too conservative.
Fast forward to today: The valuation of the upcoming IPO is at about $120 billion.
Granted, when it comes to such estimates, they can be far from perfect. But it seems like a pretty good bet that the Uber IPO will be one of history’s largest – perhaps with a capital raise of over $12 billion.
To put things into perspective, Facebook (NASDAQ:FB) raised $16 billion in its own public offering in 2012 (note that Uber has already raised $20 billion in private equity and debt financings).
What about the growth rate? Well, it has actually been decelerating, but the ramp is robust, especially in light of the scale. During the latest quarter, revenues rose by 38% to $2.95 billion. The company is also seeing traction with other business segments, such as Uber Eats and the freight unit.
Even though the company has had plenty of drama over the years – such as with allegations of stealing intellectual property and spying on rivals – the company’s new CEO, Dara Khosrowshahi, has been swift in making changes to the culture. He certainly knows how to run large organization, as he was formerly the CEO of Expedia (NASDAQ:EXPE).
Lyft recently published its review for 2018. And yes, the company has been very busy. Here are just some of the highlights:
- In September, Lyft logged its one-billionth ride. The company averaged 50 million rides a month for the year.
- The service is now available to 95% of the U.S. population.
- The company acquired Motivate, which has become the largest bikeshare operator in North America.
- Lyft launched scooters in nine cities in the U.S.
Yet despite all the success, Lyft is still far behind rival Uber. The company’s share of the U.S. ride-hailing market is 28% while Uber’s is 69%. Uber also has an extensive global footprint.
But the Lyft IPO should still do just fine. Keep in mind that the company continues to grow at a rapid pace. In the third quarter, revenues spiked by 88% to $563 million.
As for the valuation of the upcoming Lyft IPO, it is estimated at $15.1 billion (which is based on the latest valuation). The company has also raised about $5.1 billion. Some of its marquee investors include Alibaba (NYSE:BABA), General Motors (NYSE:GM), Founders Fund and Tencent.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.