IPOs, or initial public offerings, are often high risk, high reward endeavors. While many IPOs don’t go exactly how investors predict (Facebook), other IPOs soar from the start (Tesla).
For solid companies with good fundamentals, an initial public offering gives investors a chance to get in on the ground floor. But it really depends on the company. IPOs, like stocks, are only as strong as the business behind them… and public sentiment is amplified as well.
With all this in mind, what will 2018 bring to the table when it comes to these investments? We’ll take a look at promising options, but first we’ll go over the basics.
The Good and Bad of Public IPOs
What makes a “good” or “bad” IPO? Why do some IPOs perform remarkably well while others struggle — regardless of analyst advice?
In the past few years, we’ve seen many tech IPOs fall short of their predicted gains. Though the market may be excited, further looks into the books of these companies often reveal that they have issues with revenue building and monetization. Companies such as Facebook may have tremendous reach, but they may not be able to deliver upon the profit and growth that investors are looking for.
After the magic of the initial public offering wears off, analysts and investors will be looking more in-depth into the company’s operations and financial reporting. Investors need to be careful; it’s easy to get swept up in the public sentiment without viewing the mechanics of an operation. With that in mind, here are some of the top IPOs of 2018.
The IPOs to Watch Out for in 2018
There’s rarely a guarantee that an IPO will happen, but some companies have been playing around with the idea of going public for some time. These include the following:
DocuSign: Those who work in nearly any professional capacity will be well acquainted with DocuSign, a service that has become ubiquitous for contract-based dealings. DocuSign is hoping to release its IPO early this year and it’s currently valued at around $3 billion. DocuSign has been in operation since 2013.
Spotify: A user-based service, Spotify is not actually going to be running an IPO. Rather, it’s going to be attempting a direct listing; meaning that it’ll be able to sell its stock without diluting equity for other, existing shareholders. It’s an interesting move, and may make Spotify a unique type of investment.
23 and Me: A DNA testing service, 23 and Me has been growing steadily over the last few years, selling genetic testing services to customers and then aggregating and selling the data for research purposes. This creates multiple revenue streams, essentially packaging customers as a product. But if you don’t want to go with 23 and Me (or you want to hedge your bets)…
Ancestry.com: Ancestry may also be running an IPO in 2018. A direct competitor to 23 and Me, Ancestry is expecting its revenue to jump up to $1 billion in 2018. Ancestry.com has been running a genealogical site as well, making it more relevant to those interested in their heritage.
Dropbox: Dropbox currently has a $10 billion valuation… and, like DocuSign, it’s a fairly ubiquitous tech service. Unlike DocuSign, though, it has some significant competition coming up, with Google Drive and Microsoft OneDrive both vying for its space.
Barkbox: A bit of a different one among all these tech stocks, Barkbox is a special subscription service for pets. Barkbox has been operating since 2012 and has 500,000 subscribers, and though its current valuation is unknown, it expects to post $150 million in revenues in 2017.
Pinterest: Pinterest is probably more likely to run its IPO in 2019, but it has been considering it for some time. Pinterest has been growing in leaps and bounds, with over 2 billion boards and 200 million active users. Challenges, however, may be related more towards monetization — which is similar to the problems that investors have experienced with other tech stocks before.
There are a lot of sought after stocks that aren’t going to be hitting the market this year, as well as those above. Investors may need to wait until next year to purchase stocks such as Uber and Airbnb. But, this year is still a good time for IPO investors to test out the waters and think about the stocks that might fit best into their own portfolio. If you’re going to be investing in any of these companies, the IPO is the time.
Regards,
Ethan Warrick
Editor
Wealth Authority
