Tech companies had a turbulent 2018, but in 2019, keep an ‘eye’-P-O on Uber, Slack, Airbnb and a lesser-known outfit called Palantir.
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Last year, 2018, was a banner one for tech IPOs, particularly in the software as a service (SaaS) space. Household names like Dropbox, Spotify and DocuSign all tested the waters of the public markets.
Related: 10 SaaS Companies That Shone in 2018
As bellwethers of the tumultuous year for IPOs on the stock market, DocuSign’s and Dropbox’s stock prices during 2018 ranged well above their initial asking prices. And, as of January 4, 2019, DocuSign’s value was 41 percent above its IPO price.
In contrast, Dropbox on that same date closed at a mere $0.28 above its initial asking price. And Spotify — which had gone public through a direct offering (or direct floor listing) — fared even worse, closing at 29 percent below its initial opening price of $165.90.
However, the unpredictable year experienced by 2018’s class of IPOs — and the stock market in general — appears to have had little dampening effect on the number of tech companies expected to go public in 2019. Nick Giovanni, co-head of Global Technology Investment Banking at Goldman Sachs, told Business Insider just before the new year that, “We had a long period of companies staying private longer, and the birth of a generation of unicorns, and that has accelerated this year [2018] when people thought it might be leveling off.”
Related: The Uber of China Could IPO in 2018 — Start Up Your Day Roundup
Added Giovanni: “What it means is we’re set for a tech IPO super-cycle, where there are more companies going public and more large IPOs happening than ever before.”
Though not all the companies listed below have yet filed for an IPO or a direct floor listing in 2019, they have all given clear indications they are considering going public in the not-so-distant future. Here’s what you need to know:
Uber
Despite a turbulent recent history which saw the departure of founder Travis Kalanick and a retreat from several overseas markets, including Southeast Asia and Russia, Uber filed its confidential S-1 form with the Securities and Exchange Commission (SEC) late in 2018, according to the Wall Street Journal. That filing lent further credence to the Journal’s October 2018 prediction that Uber might go public in the first quarter of 2018.
The same article reported that Goldman Sachs and Morgan Stanley had valued the ride-hailing giant as high as $120 billion in September 2018. At the time, that valuation exceeded the worth of automobile companies General Motors, Ford and Chrysler Fiat combined. Given this estimation, it’s little wonder that an Uber IPO is one of the most hotly anticipated of 2019.
Slack
Dubbed the “fastest growing SaaS startup in history,” team messaging and collaboration app Slack garnered $427 million in new funding in August 2018 based on a $7.1 billion valuation, according to the New York Times. First Round Review examined Slack’s exponential growth in depth since its August 2013 launch, noting that Slack built a user base of over 30,000 teams and achieved a valuation of over $1 billion, all without “any big integrated marketing campaigns,” or the hiring of a CMO.
Thanks largely to a press campaign based on the previous experience of the Slack team, whose founder, Stewart Butterfield, had previously been a founder of Flickr, Slack received 8,000 requests to try its app on its first day. Within two weeks, that number had grown to 15,000. In the latest reported figures, noted by TechCrunch in May 2018, Slack now boasts 8 million active users, 3 million of them subscribing to the paid plan.
CNBC reported in late 2018 that Slack had hired Goldman Sachs to underwrite a 2019 IPO and that it is seeking a valuation of over $10 billion. Of additional interest, Recode found that Slack may be considering a direct floor listing (DFL), along the lines of Spotify’s 2018 NYSE listing.
In a direct offering such as a DFL, there is little focus on raising capital. For well-funded businesses like Spotify and Slack, the desire to go public comes from other benefits such as making it easier for existing stakeholders to sell their ownership shares and granting the average investor easier access to investing in the company’s future.
Airbnb
Another well-known and well-funded company reportedly considering either a DFL or traditional IPO is Airbnb. According to Recode, Airbnb CEO Brian Chesky has consulted Daniel Ek, his counterpart at Spotify, about the possibility of Airbnb holding a similar direct offering to the public.
Chesky is said to be “drawn to any approach that makes his IPO less traditional (perhaps “granting Airbnb hosts stock).” A non-traditional direct offering seems very “on-brand” for a company that has transformed how millions consume hospitality and accommodation.
According to CNBC, Airbnb became profitable in 2016, making it somewhat of a rarity in a highly valued tech company seeking to go public. Airbnb received a $31 billion private valuation as part of its last round of funding in spring 2018, per Crunchbase. The company also hired a new CFO late in 2018, according to Global Finance, yet another sign that a move into the public market is imminent.
Palantir
Chances are good that you’ve used or at least heard of Uber, Airbnb and Slack. That may not be the case for what is widely expected to be among the most valuable tech IPOs of 2018: Palantir Technologies. The WSJ reported that this data-mining titan, which it dubs “one of Silicon Valley’s most secretive companies,” may go public in 2019, with a valuation as high as $41 billion.
Co-founded in 2004 by PayPal alumnus Peter Thiel and CEO Alex Karp, Palantir “developed a suite of surveillance technologies that have reportedly been used by the military to hunt down Osama bin Laden, to avoid roadside bombs and by police departments to predict crimes before they happen,” Vanity Fair has written.
On the consumer side, Palantir is harnessing the power of big data to “comb through disparate data sources — financial documents, airline reservations, cellphone records, social media postings — and search for connections that human analysts might miss,” Bloomberg reported.
While much of Palantir’s operations remain shrouded in secrecy, in order to go public, Palantir must “issue a prospectus documenting its revenue and other internal metrics for potential shareholders, which could shed some light on that eye-popping valuation,” Vanity Fair noted.
Related: IPO vs. Getting Acquired: What You Can Learn From Snap and Instagram’s Divergent Exit Strategies
Final thoughts
This year, 2019, appears poised to yield another bumper crop of tech companies going public. Aside from the four companies examined here, Pinterest, Lyft, CloudFlare, PostMates, Stripe and Zoom are other companies reported to be weighing either an IPO or DFL this year. Examining how these and other tech giants forged their paths to going public can be a powerful source of knowledge and inspiration for any entrepreneur.
