Few months following the unfortunate hiatus on IPO activities after December’s market volatility induced by the federal government shutdown that disables companies from registering new offering at the Securities and Exchange Commission, the sun becomes bright for IPO debuts making May 2019 the biggest month for IPO fundraising since August 2014 with $15 billion raised.
Much recent public company has been favored by the market, with stocks growing more than 100% from their initial public offering prices. Zoom Video Communications and Beyond Meat are up 150% and 257% from their IPO prices, respectively.
Three of the most awaited IPO debuts from ride-hailing service companies Uber and Lyft, as well as photo-sharing platform Pinterest, has made rounds among analysts even if their stocks have fallen short from their IPO prices. Uber and Lyft’s share prices are down by 7% and 25%, respectively. Concerns over their profitability capacity and the questionable policy environment surrounding ride-sharing services have been holding their growth back.
Pinterest’s stocks fell sharply on Friday following their release of disappointing quarterly financial reports. However, stocks remain high at 41% from their IPO prices.
The dip seen in the three companies is not telling of IPO market’s poor performance, however. Bankers say that investors are particularly interested in businesses with rapid growth and good “unit economics” or the ability of companies to earn money from each new customer or transactions.
Meanwhile, unicorns, or privately held, venture-backed technology companies worth more than $1 billion, have been encouraged by market players to offer their companies publicly instead of keeping their businesses private. They are pushed into the market to allow their employees to unload their stocks.
Cybersecurity firm CrowdStrike and messaging system Slack Technologies are already considering publicly offering their companies together with other tech giants like Airbnb, WeWork, Palantir Technologies, and Stripe.
This means that the market for bankers handling these offerings is looking at a bright future. Companies pay advisory fees worth around three-quarters of what they usually would for a standard IPO transaction, bankers say, but these fees are divided between fewer banks.
However, with the trade war against China that has already dragged the entire tech industry can also derail the future of IPOs. But the backlog of deals is enormous enough to recuperate in case this happens similar to how the market bounced back following December’s market raucous behavior.