When the markets are hitting new highs, there is usually lots of enthusiasm for IPO stocks. Just look at what happened during the 1990s, when it was routine for public offerings to double or even triple on their debuts.
But as for now, Wall Street is fairly cautious on initial public offerings. This is especially the case with tech startups. Some of the notable deals that have fizzled include Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT).
However, what appears to have been the biggest jolt to IPOs is the stunning implosion of SoftBank (OTCMKTS:SFTBY). The company had to pull its offering because it was running out of cash. Because of this, WeWork had little choice but to accept a dilutive financing from its biggest investor, SoftBank.
This begs the question: What are the other tech companies that should not be public? Well, let’s take a look at seven potential new stocks that should not be:
Potential New Stocks That Shouldn’t Go Public: Didi Chuxing
After a long stint at Alibaba (NYSE:BABA), Cheng Wei went on to found Didi Chuxing Technology — a ride-sharing app operator — in 2012. He had little trouble getting interest in his startup as Tencent quickly agreed to invest $15 million.
Since then, Didi Chuxing has continued to grow at a rapid pace, becoming the dominant player in the Chinese market (the current valuation is over $60 billion).
But while an IPO is likely on the roadmap, it probably won’t be in the near future. After all, the company remains unprofitable and there are also the concerns about the high levels of competition in the Chinese market. And of course, the sentiment for ride-sharing IPOs is fairly awful right now. Note that Lyft and Uber are off about 40% from their offering prices.
Close to a year ago, Altria Group (NYSE:MO) agreed to make the biggest investment in it’s history — that is, a $12.8 billion equity stake in Juul Labs, the leading e-vapor operator in the U.S. The deal came to a valuation of $35 billion. At the time, Altria CEO Howard Willard noted:
“This is a unique and compelling opportunity to invest in an extraordinary company, the fastest growing in the U.S. e-vapor category. We are excited to support Juul’s highly-talented team and offer our best-in- class services to build on their tremendous success.”
Well, as of now, he is probably regretting his decision.
Recently Altria announced a mega write down of its investment: $4.5 billion. No doubt, a big part of this has been due to the adverse impact from the deaths and illnesses that have been alleged from vaping. The company has also seen the resignation of the CEO in September.
The investigations are still in the early stages and Juul may ultimately have no responsibility. But in the meantime, it seems like a good bet we’ll not see an IPO from this company for quite some time.
Even though Fair.com was founded only about three years ago, the company has been able to raise a whopping $2.1 billion. It certainly helps that there is a marque founding team: Scott Painter, who created TrueCar (NASDAQ:TRUE) as well as Fedor Artiles and George Bauer, who have held executives positions at Mercedes and Tesla (NASDAQ:TSLA).
Fair.com is pioneering a new market, which it calls CaaS (or cars-as-a-service). With the company’s app, you can select from more than 40 makes and models of cars and rent one of them by the week. You also get benefits like a limited warranty, roadside assistance and routine maintenance.
It’s a very interesting concept. However, Fair.com has been running into some challenges, which could make it tough for an IPO.
For example, Painter has recently resigned as CEO, which came on the heels of layoffs that represent about 40% of the workforce. Softbank, which has invested $385 million in Fair.com, appears to be focused on initiating a wide-scale restructuring of the operation.
Vice Media is a next-generation digital broadcasting company, with a focus on younger demographics. While the content is high quality and engaging — winning prestigious awards such as the Emmy — the business has been rocky.
Consider that during the summer HBO cancelled a Vice Media news program as well as ended a long-running partnership. Oh, and earlier in the year, the company initiated a layoff for about 15% of the workforce. This was part of the priority to get to profitability.
But there is a silver lining: the CEO, Nancy Dubuc, is a savvy media veteran. Prior to joining Vice Media, she was at the helm of A+E Networks.
And she has already made some bold moves, such as to acquire Refinery29, which is a digital media company focused on the female demographic.
Despite all this, there is still much work to be done. Thus, if there is an IPO, it will not be any time soon. Vice isn’t the only company that’s built its business on the back of counterculture, however, a fact legendary pot investor Matt McCall uses to the advantage of his subscribers.
As marijuana legalization cascades around North America and the rest of the world, Matt has taken to plotting major “tidalwave” events in cannabis IPOs. Some of which are coming public at mere pennies per share — and if you buy the right ones, you can turn a tiny bit of money into a massive windfall, literally overnight. Yes, there’s a lot of risk involved but the juice is worth the squeeze.
Palantir Technologies is a secretive organization that helps customers with cutting-edge analytics. For example, it focuses on areas like counter-terrorism, sophisticated frauds and cyber attacks. Keep in mind that Palantir’s systems helped with the locating of Osama bin Laden,
All this has turned into a solid business. In 2018, revenues jumped from $600 million to $880 million.
Yet an IPO is proving to be extremely complicated. If anything, the need for secrecy is one of the major problems. After all, a public company is required to make onerous disclosures.
Instead, it looks like Palantir will continue to tap private markets for funding. Although according to Business Insider, the company may still try for an IPO in 2023.
Postmates, a top player in the online delivery market, filed for its IPO earlier in the year. But unfortunately, the company may have to wait awhile. Last month, Postmates CEO said that the deal would be delayed because of adverse market conditions (the company has recently raised $225 million).
Actually, the environment is downright awful! Recently GrubHub (NYSE:GRUB) reported grim quarterly results, which tanked the stock price by 43%.
The reality is that the market is undergoing rapid commoditization. Does it really matter who delivers your food? Not really.
As a result, companies like Postmates and GrubHub have been engaged in a brutal fight to gain customers, such as with steep discounts. In the meantime, there are other pressures, such as rising labor costs, more regulation and aggressive negotiation from restaurants.
Zoox does not lack for ambition. According to the company’s website: “We are applying the latest in automotive, robotics and renewable energy to design a symmetrical, bidirectional, zero-emissions vehicle from the ground up to solve the unique challenges of autonomous mobility.”
However, Zoox has been the source of lots of drama. Back in 2018, the company terminated its co-founder and CEO.
But the real issue with Zoox is that building self-driving cars has many huge challenges. Interestingly enough, it will mean a rethinking of consumer habits. A Zoox car will not have a steering wheel and will have passenger seats that face each other.
Yet the biggest challenge is making the technology workable for busy highways. Even some of the largest tech companies are struggling with this, such as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Apple (NASDAQ:AAPL).
Keep in mind that legendary tech entrepreneur, Steve Wozniak, has recently said he’ll not see truly autonomous cars in his “lifetime.”
Self-driving cars aside, there are major things happening in marijuana right now that should have you plenty excited. If you think you’ve missed out on the biggest gains to be had, you’re wrong. Matt McCall points to three landmark events right around the corner, happening on Dec. 4, Jan. 23 and Feb. 19.
Ordinary Americans such as yourself can outsmart the entrenched institutional investors, simply by knowing when and how to invest in cannibis IPOs. Matt’s Cannabis Cash Calendar lays bare his method, which has seen successes such as a 316% annualized gain in Cronos (NASDAQ:CRON) in less than two weeks.
Critically, there are hundreds of undiscovered stocks primed for investors like you and me. You just have to know how to find them.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.