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Gear up for a surge in summer IPOs. Snapchat (NYSE: SNAP) raised some $3.4 billion on March 2 with an initial public offering (IPO) that was the largest since 2014.
Snapchat’s successful IPO shows that investors have an appetite for tech IPOs, and more importantly, that Millennials are finally loosening up their wallets to investing . . . just in time for summer IPOs.
Robinhood — the stock market trading mobile app that caters to 18-24-year olds — had its biggest day ever on the date of Snapchat’s IPO. Nearly half of all trades that day were for Snapchat’s stock.
This Millennial generation is taking the age-old advice of one of the greatest investors of all time, Peter Lynch, and his theory of “invest in what you know.” That means the entire generation could be looking to buy more of what they know this summer.
The appetite for IPOs is running high and it might be time for some of the biggest unicorns to capitalize by coming public over the coming months.
The return of the Renaissance IPO ETF (NYSE: IPO), which invests in recent IPOs like Shopify (NYSE: SHOP), has been nearly double that of the S&P 500 over the last year.
The IPO surge follows a dry spell. Just over 100 IPOs were completed in 2016, the lowest level since the financial crisis in 2009.
The relative success of the Snapchat IPO, absent its recent earnings issue, is a strong signal. Some 200 unicorns — those private companies valued at $1 billion or more — are out there and waiting.
Click here to discover how to BUY shares before a company goes public.
There is a sense of urgency too, as the stock market remains at all-time highs. Many question how much longer the bull market can last.
Companies looking to cash out by going public know that it’s much easier to get an IPO done in a rising market than in a market plagued with uncertainty due to selloffs.
With all that in mind, here are the top summer IPOs twinkling on the horizon.
Summer IPOs: Spotify
Spotify is a highly anticipated IPO. In its latest fundraising round, Spotify was valued at $8.5 billion, making it over three times the size of its public competitor Pandora (NYSE: P).
Spotify’s IPO is unique in that its IPO plan is unconventional. The company wants to do a direct listing on the New York Stock Exchange, which could significantly shorten its IPO process.
It will also allow Spotify to sidestep hiring a Wall Street bank to underwrite and “shop” its IPO; it will save money on all those bank fees. Assuming this plan goes well, it could open the door for a host of other tech startups to come public more quickly and relatively cheaply.
The Spotify IPO would bring a unique offering to the market. Unlike Pandora, which relies on advertising fees, Spotify generates the bulk of its revenue from subscribers.
Summer IPOs: Lyft
Relative to the other names on this list, Lyft is a relatively new unicorn. It crossed the $1 billion mark just a couple years ago. Now the ride-hailing service is valued at over $7 billion.
Lyft has been coy about its IPO; it seems in no hurry to go public. Lyft did raise $600 million last month backed by large investors, which could be a preparation for an IPO. Lyft can use that money to capitalize on Uber’s recent negative publicity.
Lyft is already showing marked growth that Wall Street and Millennial investors would be excited about. Lyft’s ridership was up 140% year-over-year during the first quarter. All in all, an IPO as soon as this summer would boost Lyft’s marketing efforts.
Lyft would be the only pure-play ride-hailing service in the market. Unlike Uber, which does food delivery and sells its user data, Lyft has refrained from getting into other businesses. Lyft only operates in the U.S., which can be viewed as a positive after Uber’s troubles in China.
Summer IPOs: Uber
Uber is the unicorn to top all unicorns. It’s the largest privately held company with venture capital financing and certainly would be a crown jewel of summer IPOs.
It’s currently valued at nearly 10 times its competitor Lyft — clocking in at a near $70 billion valuation. The worry is that the negative press could delay its IPO. However, an IPO might actually be a positive and boost goodwill.
Uber has a number of well-known investors such as Jeff Bezos, Lowercase Capital and Techstars Ventures that are likely pushing to cash out. A private company as large as Uber is going to have a tough time growing without access to capital market. Coming public would give it a more reliable funding source and give new investors a vested reason to give Uber another shot as a taxi alternative.
It’s true that IPOs can be volatile — just look at Snap’s performance in the last month. Still, the positives for the tech startup space outweigh the individual issues of a few companies. The new momentum in the IPO market means these three unicorns go public before year-end.