IPOs: Blockbuster plans, mediocre deals?
This “is shaping up to be a big year for IPOs,” said Jeremy Bowman in MotleyFool.com. Startup companies, some of them “unicorns” estimated to be worth billions of dollars already, are angling to sell shares to the public before a serious market downturn. The biggest of all is Uber, the ride-hailing pioneer that has “quickly spread around the globe” and is targeting a valuation of $120 billion—a number that would make Uber’s shares worth more than IBM’s or Nike’s. Its rival Lyft is also hoping to go public, as are office-space giant WeWork and the profitable vacation rental company Airbnb. Then there’s Palantir, an under-the-radar data-mining company that has worked with the government to disrupt terrorist networks. It, too, is looking to sell shares, and in talks with bankers has been valued at more than $40 billion.
It’s far from clear that all these companies will hit their targets, said Sara Salinas in CNBC.com. Insiders are far less sanguine about some of the impending IPOs than small investors are, and confidence among Silicon Valley venture capitalists “fell sharply in the third quarter.” Noted technology backer Fred Wilson says that many of the companies going public will end up with share prices “well below the lofty expectations they have in mind right now.” Investors have reason to be wary, because several of 2018’s highly anticipated public offerings “fell flat on their faces,” said Eric Volkman in MotleyFool.com. Spotify has battled “big, determined competitors” such as Pandora, and its shares have underperformed the market. Data storage and backup company Dropbox saw “some monster gains” after its 2018 public offering, but now “several high-profile investors have pulled their money out,” and its shares are down more than 40 percent since their high. Some smaller recent offerings have fared worse. The meal subscription service Blue Apron, which went public at $10 a share in 2017, has since seen its shares sink into the range of $1.
Whether the companies planning big IPOs are good deals or not, “a volatile stock market could scare some of them away,” said Paul La Monica in CNN.com. That’s especially true for smaller offerings. The unicorns “may be more insulated from the broader market”—even though shares in some high-flying onetime unicorns, such as social media company Snap, have tanked. And there’s one more thing that could leave the IPO market in “limbo,” said Eric Newcomer in the Los Angeles Times: the government shutdown. It has stalled regulatory approval of new share offerings, and if the government doesn’t reopen soon, the fun could be over “before it even gets started.”