This year was supposed to be a big one for initial public offerings. Several unicorns — defined as companies valued at more than $1 billion — were planning to list shares on major U.S. stock exchanges. Unfortunately the novel coronavirus has forced many companies to cancel or delay their IPOs. However, there are still a few upcoming IPOs worthy of investor attention.
So what’s going on? Market volatility continues to weigh on public debuts. Through June 10, there were 43 IPOs on U.S. exchanges, down 31% from the same time a year ago.
That said, the IPO market has rebounded in recent weeks. Some significant recent IPOs have included Vroom (NASDAQ:VRM) and ZoomInfo Technologies (NASDAQ:ZI). One of the largest debuts this year came from Warner Music Group (NASDAQ:WMG). The company returned to the public markets after nine years and raised $1.9 billion by selling 77 million shares priced at $25 each.
WMG stock has performed well since its listing, rising 20% in its first week of trading. Other IPO stocks are also doing well. The Renaissance IPO ETF (NYSEARCA:IPO), the only exchange-traded fund that exclusively tracks the U.S. IPO market, has posted a positive gain of 27.3% so far in 2020. That’s well ahead of the S&P 500’s year-to-date loss of 2.7%.
While volatility persists, there clearly is an appetite for upcoming IPOs.
As the U.S. economy continues to reopen and gathers strength in the second half of the year, investors should keep an eye on four of the largest upcoming IPOs. While the exact timing of these debuts remains in flux, the following four companies have each said publicly that they will IPO when market conditions present a favorable opportunity:
- Quicken Loans
Upcoming IPOs: Quicken Loans
Quicken Loans, the largest mortgage lender in the United States, is reportedly planning an IPO as soon as July. While the timing might seem risky, the company feels confident about testing the market now. Its business is booming amid record low mortgage rates and high home-buying demand.
Quicken Loans has filed an IPO prospectus and is working with investment banks such as Morgan Stanley and Goldman Sachs to manage the stock listing. The exact valuation of Quicken Loans is still unclear, but it will be a true unicorn. It will certainly be one of the largest unicorn IPOs of 2020 — possibly the largest.
Quicken Loans CEO Jay Farner said in interviews that despite the Covid-19 pandemic, Quicken Loans forecasts nearly $75 billion in mortgage applications in the second quarter. That’s up from almost $53 billion in the first quarter. The success in spite of the pandemic has been due to rock-bottom mortgage rates that have encouraged homeowners to refinance and new home buyers to enter the housing market.
Plus, Mortgage rates set a new record low on June 11. The average rate on a 30-year fixed mortgage fell below 3%.
The exact timing of the Quicken Loans IPO is still to be determined. But this is one unicorn that investors should definitely keep an eye on.
Wow, this could truly be the largest IPO of 2020. Airbnb, the online marketplace for short-term rentals and experiences, is looking to go public.
With an estimated value of more than $30 billion, Airbnb’s IPO would be a blockbuster. In April of this year, during the height of the Covid-19 downturn, the company sought funding from private equity firms. While shelter-in-place orders brought the company to a virtual standstill, Airbnb has reported an uptick in bookings as lockdown measures ease around the world. CEO Brian Chesky told Bloomberg that Airbnb had more U.S. bookings between May 17 and June 3 than it did in the same period of 2019.
And Airbnb has been laying the groundwork for its IPO for more than a year. In 2019, the company hired Dave Stephenson, a 17-year veteran of Amazon (NASDAQ:AMZN), to be its CFO and lead Airbnb to the public markets. It also acquired last-minute booking website HotelTonight and short-term meeting space rental platform Gaest.com. These acquisitions helped secure the company’s dominance in the home sharing space.
While the downturn in travel had thrown Airbnb’s IPO into doubt, widespread reports now indicate the company has revived plans for its initial public offering. According to the news, Airbnb has been inspired by the strong performance of other recent IPOs.
Look for Airbnb to go public in the third or fourth quarter. Perhaps it will get a break, and investors won’t hold it responsible for its results in the year’s first half.
Postmates is a home delivery company that aims to be all things to all people. In addition to delivering meals, it will also deliver beer, groceries, computer keyboards — you name it.
In that respect, Postmates competes against Uber (NYSE:UBER) and Grubhub (NYSE:GRUB). But it also competes against Amazon and Walmart (NYSE:WMT). Despite the stiff competition, Postmates has been doing well. Today the company operates in 3,500 cities across the U.S. and Mexico and makes more than 5 million deliveries per month.
Valued at $2 billion, Postmates will be a unicorn when it holds its IPO.
And the company has been chomping at the bit to go public. Postmates originally planned to have its IPO in late 2019, but delayed it after the lackluster performance of Uber and Lyft (NASDAQ:LYFT). Fast forward to today, and Postmates’ business has been booming as people shelter in place and turn to deliver. The company has been doing its best to capitalize on the current environment — adding new curbside pick-up features and testing robot delivery of restaurant orders in California.
While there has been no news on Postmates’ IPO recently, consolidation in the industry could spur the company into action. An IPO could help it compete and avoid becoming the object of a takeover bid.
Last on my list of upcoming IPOs is Asana, a web and mobile app that helps teams organize their work. The company has a value of $1.5 billion and filed with the U.S. Securities and Exchange Commission to go public via a direct listing.
The direct listing strategy has worked well for other Silicon Valley companies such as Spotify (NYSE:SPOT) and Slack (NYSE:WORK). In a direct listing, companies don’t issue new shares of stock. Instead, insiders sell their existing stock directly to new investors, bypassing Wall Street investment banks.
Founded by Justin Rosenstein and Facebook (NASDAQ:FB) co-founder Dustin Moskovitz back in 2008, Asana was forced to shelve its IPO after stocks cratered in March. However, speculation has intensified recently that the company still plans to go public by the end of this year. Why? The software maker raised $200 million by issuing convertible debt ahead of its planned direct listing. Moskovitz, who has an estimated net worth of nearly $14 billion, was the main lender involved in providing the convertible debt.
While the exact timing of the direct listing is not known, it is likely that the company will sell shares to the public sooner rather than later. The company has a number of high-profile backers including Facebook CEO Mark Zuckerberg and former U.S. Vice President Al Gore who are no doubt keen to see Asana shares begin trading.
With so much uncertainty in the markets right now, it is hard to know when companies will feel confident holding IPOs. But recent stock debuts have performed well and investors clearly have an appetite for more. Given their size, market positions and potential upside, Quicken Loans, Airbnb, Postmates and Asana are four upcoming IPOs to keep an eye on.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia. As of this writing, Joel Baglole did not hold any of the aforementioned securities.