The IPO market is on fire after a short-lived drought — here are the hottest public debuts to keep an eye on, and which banks are eyeing big fees for pulling them off.
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After some big successes in the 2020 IPO class, investors are looking ahead to a big-name slate of more unicorns and decacorns coming to the public market.
Palantir and Asana could go public, perhaps via direct listings, by the end of September.
Other big names eyeing IPOs include Airbnb and Snowflake.
After a dip in initial public offerings in the spring, the market is back in full swing.
Tech companies that sat out market volatility and pandemic-induced business uncertainty in the first half of the year are making plans to exit in coming months, now that the market has calmed down and investors have signaled their desire to put big money to work in newly-public companies.
March, April, and May saw only 13 total IPO pricings, per research from Renaissance Capital. Then June and July ramped up, with 58 pricings total, including tech names like ZoomInfo and SoftBank-backed Lemonade.
Ted Smith, the co-founder of tech-focused investment bank Union Square Advisors, said he's identified 50 tech companies in the IPO pipeline. But even with the uptick, the bar for IPOs could still be high for many tech names.
"We absolutely could exceed last year's total numbers of IPOs. Performance so far for the 2020 class has been very positive, which reinforces investors' desire to participate," he said. "It's important not to lose sight of the fact that even with an open IPO market, which I believe we have, the vast majority of exits of venture-backed companies in tech are still going to come from M&A, not an IPO. It's still fairly rarified air with respect to who should become a standalone company."
There were 159 IPOs in 2019 in the US last year, according to Renaissance Capital, of which 41 were tech companies.
The companies could decide to stay private and raise additional capital, as many have done in recent months. They could also sell, like when Uber agreed to buy Postmates more than a year after the food delivery company confidentially filed to go public.
Affirm, founded in 2012 by PayPal cofounder Max Levchin, partners with merchants big and small — from international brands like Adidas to niche retailers like Brooklinen and Peloton.
The company is working with Goldman Sachs on a potential 2020 listing or a sale, including to a SPAC, the Wall Street Journal reported last month. An IPO could value the company at as much as $10 billion.
A spokeswoman for Goldman declined to comment on Affirm and other IPOs.
Affirm has raised $800 million from investors including Andreessen Horowitz, Lightspeed Venture Partners, and Spark Capital. In its last funding round in April 2019, the company was valued at $2.9 billion, but its valuation has since risen to more than $5 billion – even up to $10 billion, the WSJ reported.
In late April, Levchin told Business Insider that he was eyeing expansion opportunities while other tech CEOs were battening down the hatches.
Affirm's peer Afterpay has seen its stock double in the last six months, and it became Australia's largest listed tech company by market value as customers shifted quickly to online shopping.
A spokeswoman for Affirm declined to comment.
Airbnb
Airbnb CEO Brian Chesky
Mike Segar/Reuters
The homesharing company has played the "will they, won't they" IPO game for more than a year, and some employees' stock grants expire at the end of 2020.
Airbnb, whose public-markets entrance is guided by Morgan Stanley and Goldman Sachs, was one of many late-stage companies to explore a new form of direct listing that would allow companies to raise capital. The Securities and Exchange Commission shot down the New York Stock Exchange's push for such a rule change in December, though the agency said it could be open to other iterations of the new direct listing.
CEO Brian Chesky said last month that the company has been approached by SPACs, too.
"We're looking at everything, so I probably shouldn't speculate too much on it," he said in an interview at a Reuters Newsmaker event.
In April, the company raised $2 billion in two rounds of debt from investors including Sixth Street Partners and Silver Lake. Reuters reported that warrants the investors received as part of the debt deal can be exercised at an $18 billion valuation, lower than Airbnb's early-March $26 billion valuation.
As Business Insider reported,Principal Global Investors slashed the valuation it put on its stake in Airbnb by 20% from the end of March to the end of June — after it had already cut the startup's worth by 30% in March alone.
The company's revenue dropped 67% in the second quarter, to $335 million, Bloomberg reported in mid-August. Bookings picked up in the end of the second quarter, as customers looked to book lodging for close-to-home getaways, rather than international travel.
Bloomberg also reported that Airbnb would go public by year-end.
Productivity software startup Asana hired banks last year and raised debt earlier this summer ahead of a likely listing in September.
Last week, The Information reported that Asana projected in July that its revenue would jump to $236 million this year, up from $142 million last year, and in 2021, revenue will grow 51%, to $355 million.
The delivery company filed confidential paperwork to go public in late February, with Goldman Sachs as its lead underwriter. Then its plans and business were upended by the pandemic.
In early March, CEO and co-founder Tony Xu told Business Insider that he was in no hurry to go public.
"Just because you confidentially file ... it doesn't mean that you're going to go public tomorrow, and it also doesn't mean that you have to go public," Xu said in a meeting at DoorDash's nearly empty San Francisco headquarters. "A lot of this work was done a long time ago."
In mid-June, the company said it raised $400 million in new equity funding at a $16 billion valuation. JPMorgan is also advising DoorDash on its IPO plans, said a source familiar with the path to public markets.
The competitive landscape for delivery companies has changed dramatically in recent months, as the pandemic intensifies demand for DoorDash and its peers. That's led to some M&A, including the July deal for Uber Eats to buy Postmates and a June deal for European company Just Eat Takeaway to buy Grubhub for $7.5 billion.
DoorDash has recently expanded from food delivery to partnerships with big companies like Walgreens and a convenience store concept called DashMart starting in eight cities that delivers convenience, grocery, and restaurant items.
Back in 2015, GitLab set a very specific goal: it would go public in November 2020.
CEO Sid Sijbrandij said, even before the pandemic, that the developer startup could go earlier or later than the specific date of November 18. In January, the company said it hit more than $100 million in annual recurring revenue.
True to its ethos as a radically transparent company, GitLab laid out the steps it needs to take before it goes public in its handbook. In July, the company removed its previous IPO date target to "maintain flexibility."
Sijbrandij said the company would pursue a direct listing, but it wouldn't rule out a traditional IPO.
In September 2019, GitLab said it raised $268 million at a $2.75 billion valuation. Its investors include Y Combinator, BlackRock, Franklin Templeton, Light Street Capital and Tiger Management, and Two Sigma Investments.
It's unclear who's advising GitLab on the IPO process, and a spokeswoman declined to comment on the company's plans.
Photo by Evelyn Hockstein/For The Washington Post via Getty Images
Like DoorDash, Instacart's business has exploded during the pandemic.
To keep up with the growth, in June, the grocery delivery company, which was founded in 2012, raised $225 million and then another $100 million in July at a $13.8 billion valuation.
"Overnight, Instacart became an essential service for millions of families across North America," CEO Apoorva Mehta said in a June statement.
No IPO timeline is publicly set, but Mehta told CNN back in January 2019 that he was thinking about it.
"An IPO is definitely on the horizon for us," Mehta said. "As we think about building a long-term company, we think being a public company allows us to do that in the best possible way."
A spokeswoman for Instacart declined to comment.
Palantir
Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc., attends the Allen & Company Sun Valley Conference on July 7, 2015 in Sun Valley, Idaho.
Scott Olson/Getty Images
Palantir Technologies plans to go public using a direct listing in late September, Bloomberg reported last week.
Palantir, the secretive data analytics firm founded by Peter Thiel, has spent nearly two decades running on venture capital, and eventually, on revenue. The company announced last month that it had confidentially filed draft paperwork to go public, but so far none of its financial information has been made public.
A public filing from early July shows the company is in the process of raising $961 million in private capital. So far it has raised $550 million, mostly from the Japanese holding company Sompo Holdings.
Looking at the direct listing processes for Spotify and Slack – the only companies to go public that way – offer some clues to the path Palantir may take, Business Insider reported on Saturday.
Both Spotify and Slack direct listings relied on the same three financial advisors: Goldman Sachs, Morgan Stanley, and Allen & Company. And both companies listed on the New York Stock Exchange. It's unclear which banks Palantir will work with or where it will list.
A Palantir spokeswoman declined to comment on the company's plans.
Cloud database company Snowflake, advised by Goldman Sachs, filed confidentially with the SEC, the Financial Times reported in June.
Snowflake is aiming for a valuation of between $15 billion and $20 billion. The FT also reported the company was planning a summer IPO but could wait until September or October.
When the company raised $479 million in February at a $12.4 billion valuation, CEO Frank Slootman said Snowflake was nearing $1 billion in annual revenue and was close to generating positive cash flows.
In total, Snowflake has raised $1.4 billion from investors including Sequoia and ICONIQ Capital.
"It's going to be the blockbuster enterprise listing for 2020," Constellation Research analyst Ray Wang told Business Insider in June. "Investors are looking for winners on cloud and analytics."
Snowflake is building out a data exchange where providers can connect with the consumers of their data in a marketplace hosted and managed by the startup, Business Insider reported in March. Early adopters include the hedge fund Coatue, the data giant FactSet, and the $53 billion asset manager Causeway Capital Management.
A representative for Snowflake declined to comment on IPO plans.
