The upcoming IPOs are creating quite a buzz.
They include an online sportswear seller, a healthcare billing platform, and an enterprise software company.
The IPO market had been sluggish for nearly two years, but it’s finally showing signs of life. There are more IPOs coming up in the next few months, and investors have a lot to look forward to.
In the third quarter of 2023, there were 30 IPOs that raised a total of $7.8 billion, which is even more than the entire year of 2022.
The biggest IPO came from Arm Holdings (ARM), a huge semiconductor company that’s behind most of the world’s smartphones. Arm’s IPO raised a whopping $4.87 billion, making it one of the largest IPOs in the U.S.
Another notable IPO was from Instacart (CART), a tech company that delivers groceries on demand. In the first half of 2023, Instacart made $1.5 billion in revenue, up 31% from the previous year, and they have 7.7 million people ordering from them every month.
Then there’s Klaviyo (KVYO), a top online marketing services provider. In the first six months of 2023, Klaviyo’s revenue grew by over 50% to $320.7 million, and they even turned a profit of $15.2 million through their IPO, where they raised $576 million.
On the stock market, the results have been mixed. Arm’s shares are up about 8% from their IPO price, Instacart’s trading at about 13% below its offering price, but Klaviyo has managed to gain 12%.
The IPO market’s recovery could continue, but it’s still a challenging environment. Interest rates are going up, and there are concerns that the economy might be slowing down. Nevertheless, it’s good to see Wall Street getting deals done.
Renaissance Capital, in its third-quarter IPO review, explained that while they are a bit cautious due to less IPO filings and market uncertainty, they are encouraged by the return of big tech IPOs. They remain hopeful that IPO activity will gradually pick up through the rest of 2023 and into 2024.
Indeed, more companies are starting to test the waters, so now is the best time to check out the most anticipated upcoming IPOs. This list focuses on larger, more established companies that are sure to create a lot of excitement on Wall Street and beyond.
What you'll learn:
➤ 8 Hot Upcoming IPOs
Michael Rubin’s journey as an entrepreneur began when he was just eight years old, selling vegetable seeds to his neighbors.
By the time he turned 15, he tried his hand at opening a ski shop, though it didn’t quite work out. However, these early experiences taught him some valuable lessons.
These lessons proved useful when Rubin ventured into the business of selling discounted athletic equipment. By his early twenties, his business was raking in over $50 million in revenue. Rubin then took the bold step of acquiring Ryka, a women’s athletic shoe company.
When the internet became a game-changer, Rubin didn’t waste any time. He founded GSI Commerce, a leading e-commerce company. Eventually, he sold it to eBay for a staggering $2.4 billion. Crucially, he retained ownership of Fanatics.
Rubin saw an opportunity in the sports licensing market, and he applied e-commerce technology and built a smart logistics system. This allowed Fanatics to secure exclusive rights to brands from big names like the NFL, NBA, MLB, and numerous colleges.
Fanatics also made some bold acquisitions. In the U.S., they acquired the trading card company Topps, the clothing brand Mitchell & Ness, and the domestic assets of the online sports betting firm PointsBet. Fanatics now boasts a valuation of approximately $31 billion.
There are hints that Fanatics may be gearing up for an IPO. The company recently held an investor conference and even brought on board Meta Platforms’ former head of investor relations.
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2️⃣ Cerebras Systems
In the era of artificial intelligence (AI), Nvidia has been a notable success story, thanks to their GPUs (graphics processing units) that handle complex model processing effectively.
However, the competitive landscape in the AI chip market has many startups vying for the top spot.
One such standout is Cerebras Systems, founded in 2015 by a group including Andrew Feldman, Gary Lauterbach, Michael James, Sean Lie, and Jean-Philippe Fricker. This came after their prior startup, SeaMicro, was sold to Advanced Micro Devices (AMD) for $334 million.
Cerebras has developed a new breed of computer systems designed exclusively to accelerate generative AI work.
Their flagship product, the CS-2 system, powered by the world’s largest and fastest AI processor, simplifies the training of large models by bypassing the complexities of distributed computing.
According to research from Next Move Strategy Consulting, the chip market was valued at about $29 billion last year, with predictions of growth to $305 billion by 2030.
In late 2021, Cerebras announced a funding round of $250 million, bringing their total funding since inception to $720 million.
Cerebras is positioned as a strong contender for an IPO in the near future.
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3️⃣ Waystar Technologies
Waystar Technologies operates a cloud-based platform that assists healthcare organizations in managing their payments. The company was formed in 2017 through the merger of Navicure and ZirMed.
In 2019, the EQT VIII Fund and the Canada Pension Plan Investment Board acquired a majority equity stake in Waystar, valuing the company at $2.7 billion.
With robust financial support, Waystar continued its growth by acquiring other companies. Currently, the firm serves over 1 million providers through its platform and processes an impressive 2.5 billion transactions per year, boasting a 96% client satisfaction rate.
Investors will be pleased to know that an upcoming IPO is on the horizon, likely taking place next year. Waystar recently filed confidentially for a public offering, and according to Reuters, the company is now valued at approximately $8 billion.
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4️⃣ Navan (formerly TripActions)
Founded in 2015, Navan offers a platform that streamlines travel and expense management for businesses.
The company, previously known as TripActions, leverages cutting-edge technologies like machine learning and artificial intelligence to reduce costs and enhance user experiences. They’ve even integrated ChatGPT technologies to assist in tasks like crafting personalized itineraries.
When the COVID-19 pandemic emerged, Navan, like many others, faced a steep decline in business, leading to significant layoffs. However, they managed to secure the necessary funding to keep the business afloat.
Navan has since made a strong comeback, focusing on innovation. For example, they introduced a global rapid reimbursements program, allowing employees to be reimbursed within just 24 to 48 hours.
The company has also been actively pursuing acquisitions, including Resia and Comtravo, two European-based travel management companies, and the purchase of Reed & Mackay, a provider of services for high-end business travel and events.
In October, Navan announced a funding round of $304 million, valuing the company at $9.2 billion. This is a significant increase, nearly doubling its value since 2020. While they have confidentially filed for an upcoming IPO, it’s not likely to happen until the following year.
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Just over a decade ago, a group of computer science students at the University of California, Berkeley, introduced Apache Spark, an open-source system designed for managing large-scale data.
The platform garnered significant adoption, driven by the increasing demand for technologies like artificial intelligence and machine learning.
A few years later, those same students would come together to launch Databricks, a company aimed at commercializing the software for enterprises.
Over the years, the company has built a customer base of more than 7,000, featuring prominent names like Shell, Regeneron Pharmaceuticals, CVS Health, and Comcast.
Databricks has also cultivated an extensive ecosystem of partners, including major players like Microsoft and Amazon.com, along with consultancies like Booz Allen Hamilton and Paris-based IT services firm Capgemini.
For many companies, managing data is a challenge, primarily due to data being siloed and complex to analyze.
The Databricks platform is a solution that allows for effective data management, regardless of where it’s stored. This capability enables real-time analytics, which can be pivotal for informed decision-making.
Databricks has also ventured into ChatGPT systems, with more than 1,000 customers already utilizing this technology. Notably, Databricks recently unveiled its Dolly large-language model as open source, providing enhanced control and security for enterprises.
Details about a Databricks IPO are not yet disclosed, but strong investor interest in the company is evident.
In September, Databricks secured a Series I funding round exceeding $500 million at a valuation of $43 billion, with participation from notable investors like T. Rowe Price Associates, Fidelity Management & Research, Franklin Templeton, and Nvidia.
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Founded in 2011, Intercom specializes in developing technologies that enhance customer engagement across sales, marketing, and support. The company boasts over 25,000 customers, and its platform facilitates the delivery of more than 500 million messages every month.
Given the economic uncertainties, there is a growing emphasis on improving customer engagement. Intercom’s solution offers personalized communications that have proven to generate a robust return on investment (ROI).
For example, digital analytics software firm Amplitude managed to save $1 million in costs and increase customer engagement rates by at least 25% using Intercom.
Intercom has made substantial investments in ChatGPT technology. In March, they introduced their Fin service bot, powered by OpenAI’s GPT-4 platform. This innovative bot operates without the need for complex setup or training, learning to function by analyzing company information.
Unlike many other tech startups, Intercom has not relied on raising large amounts of venture capital funding. Their last funding infusion came in 2018 when they raised $125 million. In other words, Intercom has been resourceful with their financial resources.
Jaime Moreno de los Rios, Chief Operating Officer of financial products and services firm Secfi, believes the company is on track for an IPO in 2023 or 2024. He noted, “They have since seen strong growth and have grown into their last valuation.”
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The payments industry might not seem glamorous, but it’s highly lucrative, especially as more transactions move online. One of the major beneficiaries of this shift is Stripe, established in 2010.
The company has developed a user-friendly system for online payments, requiring just a few lines of code for implementation.
Stripe’s founders, Patrick and John Collison, found inspiration for their venture when they faced challenges using existing payment solutions for their startups.
In the past year, Stripe encountered difficulties in its business. Many of their customers are startups, and some of them experienced slower growth. Consequently, Stripe had to trim its workforce, resulting in a reduction of about 1,120 employees.
However, despite these challenges, the company remains robust. Remarkably, over 100 customers manage more than $1 billion in annual payments through the Stripe platform.
In March, Stripe announced a Series I funding round that raised over $6.5 billion, valuing the company at $50 billion.
This impressive figure places Stripe among the world’s most valuable startups. An IPO seems increasingly likely, making Stripe one of the hottest upcoming IPOs to watch.
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8️⃣ BMC Software
BMC Software, founded in 1980, initially focused on developing software for IBM mainframe systems. While they enjoyed strong growth, it began to taper off toward the end of the 1980s.
In response, the company diversified its product line, expanding into areas such as Windows systems. Their growth strategy included substantial acquisitions.
Today, mainframe systems remain a significant part of BMC’s business. However, BMC has modernized its offerings, incorporating features like artificial intelligence and machine learning.
BMC has established a strong presence in various essential categories including DevOps, AIOps, service management, security, cloud infrastructure management, and workflow orchestration. Remarkably, the company counts approximately 86% of the Forbes Global 50 as its customers.
BMC was previously a publicly traded company from 1988 until 2013. It was then taken private in a transaction valued at around $6.9 billion, with acquirers including Bain Capital and Golden Gate Capital. Five years later, private equity firm KKR purchased BMC Software for $8.5 billion.
Now, it appears that BMC Software is set to return to the public markets. The company recently filed confidentially for an IPO with an estimated valuation of approximately $14 to $15 billion.
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➤ Should I invest in IPOs?
IPOs can indeed offer significant opportunities for investors, but they come with their own set of risks and considerations. Here are some key points to keep in mind:
Pros of Investing in IPOs
- Growth Potential: IPOs often involve young and innovative companies with substantial growth potential. Early investors can benefit from the appreciation in the stock’s value as the company expands and prospers.
- Profit Opportunities: If you invest in a well-performing IPO, you can potentially enjoy substantial profits, especially if the company becomes a market leader or experiences rapid growth.
- Access to Early-Stage Companies: IPOs provide access to invest in companies during their early stages, which isn’t always possible in the open market.
- Diversification: Including IPOs in your investment portfolio can add diversification and balance, as it introduces different types of assets.
Cons of Investing in IPOs
- Risk: IPOs carry higher risks compared to established companies. The company may lack a track record of profitability or face uncertain market conditions.
- Volatility: IPO stocks can be highly volatile, with prices subject to significant fluctuations. This volatility can make it challenging to predict future performance.
- Lack of Information: Newly public companies may have limited financial histories and publicly available information, making it harder to assess their potential.
- Market Hype: The initial excitement surrounding an IPO can lead to inflated stock prices, and this exuberance may not be sustainable. Prices may drop after the initial surge.
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Considerations for IPOs
- Diversify Your Portfolio: Given the risks associated with IPOs, it’s advisable not to allocate a significant portion of your portfolio to these investments. Consider limiting your exposure to 5-10% of your overall portfolio.
- Patience is Key: As Jeff McClean suggests, waiting for the stock price to stabilize after the IPO can be a prudent strategy. Initial surges are often followed by corrections, providing opportunities for entry at more reasonable valuations.
- Due Diligence: Before investing in an IPO, carefully review the S-1 filing, which contains essential information about the company. Pay close attention to the prospectus summary, risk factors, and founders’ letters to understand the business’s prospects and risks.
- Long-Term Perspective: Consider whether you are looking for short-term gains or are willing to hold the investment for the long term. Short-term trading of IPO stocks can be highly speculative.
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➤ Final Thoughts
In summary, IPOs can be attractive investment opportunities, but they also come with inherent risks. Successful IPO investing involves thorough research, a diversified portfolio, and a long-term perspective to navigate the potential volatility of these early-stage stocks.
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