An initial public offering (IPO) is a pivotal point in the life of a startup — when equity shares of the public for the first time. Startup founders lay their hard work before the scrutiny of shareholders and the market.
Still, IPOs put the company at hand in a better position to further access capital, as well increasing its media exposure and building out its public image. There are many factors that determine if a company is ready for an IPO. You can find some of them here.
For tech companies, 2014 was a strange year for the IPO market. Big name brands like Twitter and Facebook got a slow start as public companies, but e-commerce giant Alibaba took the title of largest IPO in history at a whopping $25 billion.
According to John C. Edmunds, a professor of finance at Babson College, the IPO market is looking very good right now, along with the venture capital industry. This should drive some good activity in the space in 2015.
Here are 10 IPOs slated for 2015 that could have a big impact on their respective markets.
The looming IPO that was hanging over the heads of everyone in the tech industry was that of enterprise cloud company Box. The IPO was put on hold last summer, but the company recently priced its offering and opened on the exchange on January 23, 2015.
According to Max Dufour, a partner at Harmeda, a successful public play by Box would “demonstrate that a standalone company with one great product can find a niche between giants such as Google and Microsoft by building a richer, more innovative and focused product.”
It’s no surprise the ridesharing company Uber is one of the IPOs to watch in 2015. The company has already raised almost $5 billion in venture capital and carries a high valuation.
“A Uber IPO will further establish the industry and will reinforce a global company, which did not exist a few years ago, driven by consumer demand for immediate, convenient and inexpensive transportation,” Dufour said.
In addition to more firmly establishing its own market, Uber will further disrupt the taxi industry. This is especially true for medallion-based systems like New York City, Edmunds said, where the medallions once carried a $1 million price tag.
“Those are the guys that are really screaming because, if Uber really works, then their medallion will be worth zip,” Edmunds said.
The credit card payments industry is one that has been ripe for disruption for quite sometime, and that disruption has been spearheaded by mobile payments company Square, which is known for its square shaped credit card readers that turn smartphones and tablets into point-of-sale systems.
In an industry known for high margins and fees and poor customer service, Dufour said that a Square IPO would confirm the value proposition of easy mobile payments with a simple user interface.
Few names are more well-known in big data than Cloudera. The company, which provides enterprise deployments of the open source project Hadoop. At this point, Cloudera has raised more than $1 billion and has built its ecosystem out to include around 1000 partners. As big data gets closer to becoming a necessity in the enterprise, Cloudera is strategically positioned to beat all its competitors to the public market and establish dominance as the enterprise Hadoop provider.
The reorganization of certain company leaders, combined with Dropbox CEO Drew Houston’s comments about operating as a public company last year, seem to point to a Dropbox IPO in the near future.
If Dropbox were to IPO, especially alongside Box, Edmunds said that it could push server and cloud innovation further along at a faster rate. Bigger investments in the service would drive more demand for cloud and storage technology, which would drive advancements in servers and data centers.
Much like Uber, Airbnb is a company that has faced its fair share of regulatory issues and public backlash, but retains a multi-billion dollar valuation. The company is the undisputed king of the sharing economy movement, and success as a public company would help to further legitimize many of the “sharing” models.
Pinterest is nearing its fifth anniversary, is valued close to $5 billion, and could be close to an IPO. The online social pinboard boasted impressive user growth early on, and its lean toward products makes it an ideal platform for ad revenue. The company has begun pushing harder towards monetization with new tools like “promoted pins,” which could be further evidence of an imminent filing.
Music-streaming service Spotify may also be in a good position for an IPO in 2015. The company’s biggest rival, Pandora, went public a few years ago but they subsist on different revenue models. Spotify seems to make more revenue on subscriptions, while Pandora is more ad-dependent.
Imran Khan, a banker who helped lead the Alibaba IPO in 2014, has joined the Snapchat team, hinting at the possibility of an IPO in the near future. Snapchat made headlines earlier when it turned down a $3 billion offer from Facebook, meaning an IPO is probably part of the roadmap. The question is merely when.
Another Chinese technology company that is making waves is smartphone producer Xiaomi. The company is valued by many at close to $45 billion, and it’s shipped millions of phones so far. One of the main concerns for Xiaomi is its slim margins, which have concerned some investors.
According to Troy Henikoff, of TechStars Chicago, the danger with any of these high-value potential IPOs is the potential of disparity between expectations and reality.
“If there is an IPO of one of the big valuation companies (like Uber) where the IPO price does not match the expectations of investors – and some people lose money or do not make the multiples they expected – it will definitely have a chilling effect on valuations,” Henikoff said.
What do you think?
What IPOs should we look out for in 2015? Let us know in the comments.