Among the benefits are a reputational boost, an expansion in the investor base, and a transparent valuation (liquidity). Beyond these objectives, an IPO comes with many other benefits and obligations. The main objectives of an IPO are to raise capital and to provide liquidity to the existing investors, which at this stage will mostly be the founders, employees, and management, and early investors such as angel, venture capital, and private equity funds. So why would a company undergo such a lengthy and complex process? Overall, fewer companies are choosing to do so, and they tend to do so at a later stage. Being publicly listed comes with many advantages, but it is also complex and costly. An initial public offering describes the process through which a company goes from being entirely privately held to being traded on a stock exchange. Very few events are as momentous in the life of a company as going public through an IPO. This article will provide a framework to analyze these financial events, first briefly covering the process behind the decision to go public before proceeding to cover the process and success factors behind IPOs as well as the current market and considerations for the most recent and upcoming public market offerings. We will cover these in more detail in the following section. In practice, this means that it bypassed investment banks and the IPO profits while at the same time being able to enjoy the benefits of being a publicly listed company. Slack employed the same strategy as Spotify and used a direct listing rather than an IPO. Wanda raised less than half than its desired amount, and tanked in post-IPO trading, making it the second-worst performing IPO of the year.įinally, it is also worth spending a few words on the alternative strategy used by Slack. Finally, the latest failed IPO to make the news is that of the Chinese sports company Wanda Sports, owner of Ironman, which made its Nasdaq debut on the 26th of July. US IPOs Over $1 Billion, Worst PerformersĮven as the stock recovered, it is still languishing right below the IPO price of $45.Īnd it hasn’t been just tech companies that have had mixed successes and failed IPOs when coming to private markets: Anheuser Busch INBEV NV had to famously scrap its planned IPO in APAC, resorting instead to a private business sale. The company raised over $8.1 billion, but failed to achieve its desired valuation target of $100 billion the stock dropped sharply on the first day of trading, making it one of the worst IPOs over $1 billion. Uber Technologies (NYSE: UBER), on the other hand, has been covered by an endless amount of articles as being a flop, a failed IPO. As Howard Lindzon wrote on the 29th of July, “The best performing asset of 2019 is Beyond Meat-at $14 billion, it has a larger market cap that 30 percent of all S&P Companies-and which Ivanhoff calls a biotech edible.” (Note: This was written before Beyond Meat announced its unexpected follow-on offering and took a significant dip however, the stock is still up by approximately 170% since its IPO). Beyond Meat (NASDAQ: BYND), which we recently discussed in another article, is being reported on as one of the biggest successes of recent years, not just 2019: In fact, its IPO was the best performing one for a company listing for over $200 million since the financial crisis of 2008. Not all of these IPOs have been successes: Take for instance the different fates of Beyond Meat and Uber.
Beyond Meat, Uber, Lyft, and Pinterest are all examples of high-profile companies that have gone public this year, with Airbnb and The We Company (the parent company of WeWork) slated for their stock market debut at some point this year. Number of IPOs in the United States from 1999 to 2018Ģ019, however, appears to be bucking the trend, with a large number of high-profile tech companies going live on stock exchanges. The financial crash most definitely did not help the renaissance of the sector, as did the increase in private markets and the rise of the super fund. It had never recovered from the high-profile flops of the dot com bubble, in which many seasoned and less seasoned investors lost substantial amounts of money.
For many years, the initial public offering (IPO) market appeared completely dormant.
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