11 Hot Upcoming IPOs to Watch

The initial public offering (IPO) market is starting to show signs of life after an awful drought that lasted roughly two years. Investors have more to look forward to, as well, with several upcoming IPOs likely to roll out over the next several months.

In 2023, the IPO market continued to be sluggish, with 108 offerings that raised $19.4 billion, according to Renaissance Capital. But this performance was much better than 2022, when escalating interest rates, the war in Ukraine and worries about inflation kept issuers at bay. That year, there were only 71 companies that went public, raising a mere $7.7 billion. It was the worst performance for IPOs in over 30 years.

But 2024 may be when IPOs finally get back into gear. One of the most important factors is the seemingly unstoppable bull market. Investors have been buying up growth stocks, especially in red-hot categories like artificial intelligence (AI). There is also renewed interest in early stage biotech operators.

So far this year through February 21, there have been 30 IPOs. While this is down 12% compared to the year-ago period, the nearly $6 billion that has been raised triples what was raised over the same time frame in 2023. The top gainer at this point is J-Long Group (JL), a Hong Kong-based distributor of reflective and non-reflective garment trims. The consumer discretionary stock is up about 150% since its late-January market debut.

Then there’s CG Oncology (CGON), a late-stage biotech company that develops backbone bladder-sparing therapeutics for patients with bladder cancer. The healthcare stock went public on January 25 and has gained more than 20% in that time.

These are certainly success stories, but not all stocks head higher after an IPO. Healthcare-services provider BrightSpring Health Services (BTSG) is down nearly 8% from its January 26 IPO.

IPO market rebound could continue

While the current market for initial public offerings remains challenging, Bill Smith, co-founder and CEO of Renaissance Capital expects filings to start to pick up this spring. Indeed, we’re starting to see a few more companies testing the waters, making now the best time to explore the most anticipated upcoming IPOs.

I have covered the best upcoming IPOs to watch for Kiplinger for several years now. For this list, I focused on large, more established names that should generate plenty of excitement on Wall Street and Main Street alike.

Upcoming IPOs

 

Reddit

While attending the University of Virginia in 2005, classmates Steve Huffman, Alexis Ohanian and Aaron Swartz co-founded Reddit. The site started as an app that used SMS text messaging to order food. This idea quickly fizzled, but the group saw a bigger opportunity within social media, especially with Facebook growing at an astonishing pace.

Reddit included the social sharing of news, discussion forums and content ratings. Within a year, it was sold to Condé Nast Publications. In 2011, Reddit was spun out and within a few years was raising money from Silicon Valley luminaries such as Sam Altman, Marc Andreessen, Peter Thiel and Ron Conway. Even Snoop Dogg invested in Reddit.

The platform has continued to build a strong community of users over the years. Currently, there are roughly 850 million MAUs (monthly active users) and 70 million DAUs (daily active users).

According to Bloomberg, Reddit reported more than $800 million in revenue in 2023, up 20% from the year prior.  Yet the social media market has been choppy lately, as seen with the disappointing earnings reports from Snap (SNAP) and Pinterest (PINS).

In late 2021, Reddit confidentially filed for an IPO, though the offering was delayed because of market conditions. However, on February 22, Reddit filed its IPO prospectus with the Securities and Exchange Commission (SEC), indicating the company is preparing for a March offering. According to the filing, Reddit will list on the New York Stock Exchange (NYSE) and trade under the ticker “RDDT.”

The Wall Street Journal recently reported the company will sell a set number of its IPO shares to current Reddit users.

Shein

Entrepreneur Chris Xu founded Shein in 2011. The company was initially a website for selling womenswear, with a focus on wedding dresses, and the business model was based on buying from the wholesale market in Guangzhou. As for the sales, Shein sold products outside of China.

To help boost growth, the company invested heavily in partnering with social media influencers. There was also an expansion into other areas, including shoes, cosmetics and jewelry.

In addition to its cheap, trendy offerings, Shein is popular because of its technology. The company has been effective in using sophisticated AI for product selection, ad targeting and supply chain optimization.

In 2024, Shein raised $2 billion from private investors and the valuation was set at $66 billion. However, this was down from $100 billion a year ago due to tough market conditions and increasing competition, including from Temu, an online retailer owned by PDD Holdings (PDD).

There are also regulatory concerns surrounding a Shein IPO – which prompted the retailer to move its headquarters to Singapore from China in 2022. Still, U.S. lawmakers are concerned about the company’s labor and environmental practices.

Shein has confidentially filed for an IPO in the U.S. and a public offering is expected to happen this year.

Skims

Only 43 years old, Kim Kardashian is one of the wealthiest self-made women in the world.  Forbes estimates her net worth at $1.7 billion.

A big reason for this is Skims, a shapewear and clothing brand. Kardashian co-founded the company in 2019, alongside Emma Grede and Jens Grede.

The Skims brand is about body positivity and inclusivity. For example, the colors of the clothes are for diverse complexions. There is also a wide range of sizes that go from XXS to 5XL.

Kardashian’s marketing savvy has been a huge benefit to Skims. A critical part of its strategy is to rely on word-of-mouth buzz from social media influencers. But partnerships have been important for growth, too. For example, Skims has formed collaborations with Nordstrom (JWN) and the U.S. Olympics team.

Skims’ growth has been strong. In 2023, sales were on pace for $750 million, up from $500 million in the prior year. The company is also profitable.

Last summer, Skims announced a round of funding raised $270 million, giving the company a $4 billion valuation. The lead investor was Wellington Management. Other backers included Green Oaks Capital Partners, D1 Capital Partners and Imaginary Ventures.

While no date has been set for an offering, Wellington is known to invest in pre-IPO companies. Skims also recently hired a chief financial officer. So yes, a deal could happen in 2024  – making Skims one of the most anticipated upcoming IPOs to watch out for.

Fanatics

Michael Rubin’s entrepreneurial journey started at eight years old when he sold vegetable seeds door-to-door. By age 15, he had opened a formal ski shop. While it ultimately failed, he learned some valuable lessons.

These lessons helped Rubin with his next business – selling closeout athletic equipment. By his early 20s, the business was generating over $50 million in revenues. Rubin then purchased Ryka, a women’s athletic shoe company.

As the internet burst on the scene, Rubin wasted little time in capitalizing on the opportunity and founded GSI Commerce, a top e-commerce company. He would eventually sell it to eBay (EBAY) for $2.4 billion. Through this transaction, he was able to maintain ownership of Fanatics.

Rubin realized that the sports licensing market was ripe for disruption. He applied e-commerce technology to the business, but also built sophisticated logistics systems. This allowed Fanatics to obtain exclusives to rights for brands from organizations like the NFL, NBA, MLB, HNL and numerous colleges.

Fanatics has also been aggressive with acquisitions. In the U.S., it purchased trading card company Topps, clothing brand Mitchell & Ness and the domestic assets of online sports betting firm PointsBet. Fanatics currently sports a valuation of about $31 billion.

There are signs that Fanatics is preparing for an IPO. The company recently held an investor day conference and hired Meta Platforms’ (META) former head of investor relations.

Waystar Technologies

Waystar Technologies operates a cloud-based platform that helps healthcare organizations manage their payments. The company was created in 2017 through the merger of Navicure and ZirMed.

Then, in 2019, the EQT VIII Fund and the Canada Pension Plan Investment Board acquired a majority equity stake in Waystar, setting a value at $2.7 billion.

With the financial backing, Waystar continued to buy other companies and grow its business. Currently, the firm has over 1 million providers on its platform and processes 2.5 billion transactions per year. The client satisfaction is 96%.

Investors will be happy to hear that this upcoming IPO is likely to happen sometime next year.  Recently, Waystar made a confidential filing for a public offering. According to Reuters, the valuation of the company is now about $8 billion.

Cerebras Systems

One of the biggest winners of the artificial intelligence (AI) revolution is Nvidia (NVDA). The company’s GPUs (graphics processing units) have proven ideal for handling the complex processing of models.

But there are various startups gunning for the lucrative AI chip market.

One of the standouts is Cerebras Systems. The company was founded in 2015 by Andrew Feldman, Gary Lauterbach, Michael James, Sean Lie and Jean-Philippe Fricker. This came after the group sold their prior startup, SeaMicro, to Advanced Micro Devices (AMD) for $334 million.

“Cerebras has built a new class of computer system, designed for the singular purpose of accelerating generative AI work,” said Joe Endoso, president at private investment platform Linqto. “The company’s flagship product, the CS-2 system, powered by the world’s largest and fastest AI processor, makes training large models simple and easy, by avoiding the complexity of distributed computing.”

According to research from Next Move Strategy Consulting, the chip market came to about $29 billion last year. The firm predicts that the size will soar to $305 billion by 2030.

In late 2021, Cerebras announced a funding round of $250 million. This brought the total amount of funding since inception to $720 million.

As for its place on this list of the hottest upcoming IPOs, Cerebras could be on tap to go public this year.

Databricks

A little more than a decade ago, a group of computer science students at the University of California, Berkeley created Apache Spark, an open-source system meant to manage big data. The platform achieved massive adoption alongside growing needs to use systems, such as artificial intelligence and machine learning.

A few years later, those students would go on to launch Databricks to commercialize the software for enterprises. Over the years, the company has amassed a customer base of more than 7,000, and includes companies like Shell (SHEL), Regeneron Pharmaceuticals (REGN), CVS Health (CVS) and Comcast (CMCSA).

Databricks also has an ecosystem of hundreds of partners, including blue chip stocks Microsoft (MSFT) and Amazon.com (AMZN), as well as consulting company Booz Allen Hamilton (BAH) and Paris-based IT services firm Capgemini (CAPMF).

For many companies, working with data is challenging. Part of this is due to the information being stored in silos. But there are also problems with processing data to get useful insights.

The Databricks platform allows for managing the data regardless of where it is stored. This makes it possible for real-time analytics, which can be crucial for making better decisions.

Databricks has also been creating ChatGPT systems. There are currently more than 1,000 customers for this technology. Databricks recently launched its Dolly large-language model, which is open source. This allows for more control and security for enterprises.

As far as upcoming IPOs go, details around one for Databricks are currently unknown, but there is strong investor interest in the company.

In September, Databricks announced a Series I round of over $500 million at a $43 billion valuation.  The investors included firms that typically participate ahead of a public offering, such as T. Rowe Price Associated, Fidelity Management & Research and Franklin Templeton. The round also included participation from Nvidia.

Navan

Founded in 2015, Navan operates a platform that provides travel and expense management for businesses. The company, which changed its name from TripActions earlier this year, leverages next-generation technologies like machine learning and artificial intelligence to lower costs and improve the user experience. It also added ChatGPT technologies that can assist with things like creating personalized itineraries.

When the COVID-19 pandemic emerged, Navan suffered a steep decline in business and the company had to lay off hundreds of employees. But it was able to secure financing – which helped keep the business afloat.

Navan has since made a strong comeback and continues to innovate its platform. For example, the company rolled out its global rapid reimbursements program. This allows employees to get reimbursed within 24 to 48 hours.

The company has also been focused on acquisitions. Some of the deals include Resia and Comtravo – two European-based travel management companies. Then there was the purchase of Reed & Mackay, a provider of services for high-end business travel and events.

In October, Navan announced a $304 million funding at a valuation of $9.2 billion, up two times since 2020. The company also confidentially filed for its upcoming IPO, but an offering is not likely to happen until later this year.

Intercom

Founded in 2011, Intercom builds technologies to improve customer engagement for sales, marketing and support. The company has more than 25,000 customers and the platform delivers over 500 million messages per month.

With the uncertainties about the economy, there is definitely more emphasis on customer engagement. As for Intercom, its solution provides personalized communications and has been shown to generate strong ROI (return on investment). For example, digital analytics software firm Amplitude saved $1 million in costs and increased customer engagement rates by at least 25% by using Intercom.

Intercom has been aggressive in working with ChatGPT technology. In March, it announced its Fin service bot, which is powered by OpenAI’s GPT-4 platform. There is no setup or training required. Instead, Fin learns how to operate by analyzing company information.

Unlike many other tech startups, Intercom has not raised huge amounts of venture capital funding. The last infusion of capital came in 2018. At the time, the company raised $125 million. In other words, Intercom has been fairly efficient with its funds.

Jaime Moreno de los Rios, who is the chief operating officer of financial products and services firm Secfi, says that the company could be on track for an IPO in 2024. “They have since seen strong growth and have grown into their last valuation,” he said.

Stripe

The payments industry is not particularly exciting, but it can be lucrative and the growth prospects look bright as more transactions continue to move online.

A major beneficiary of this is Stripe. Founded in 2010, the company has built an easy-to-use system for online payments. It’s only a matter of using a few lines of code.

The founders of the company are brothers: Patrick and John Collison. They got the inspiration for Stripe when they had challenges using existing payments solutions for their startups.

As for the past year, Stripe has had to face difficulties with its business. The company has a large number of startups as customers, which have seen decelerated growth. As a result, Stripe cut 14% of its workforce, or about 1,120 employees.

Despite this, the business remains robust. Consider that about 100 customers manage more than $1 billion in annual payments on the platform.

In March, the company announced a Series I round of funding for over $6.5 billion at a $50 billion valuation. This makes the company one of the most valuable startups in the world.

What about a public offering? It looks like Stripe could be one of the hottest upcoming IPOs to watch for in the near future.

BMC Software

Founded in 1980, BMC Software began as a developer of software for IBM (IBM) mainframe systems. Growth was strong, but started to lag at the end of the decade. This is why the company diversified its product line into other categories, such as for Windows systems. A big part of the growth strategy was through acquisitions.

Today, mainframe systems remain a significant segment of the overall business. However, BMC has modernized its offerings, including with artificial intelligence and machine learning capabilities.

BMC also has strong footprints in other important categories like DevOps, AIOps, service management, security, cloud infrastructure management and workflow orchestration. The company has about 86% of the Forbes Global 50 as customers.

The company previously traded as a public stock from 1988 until 2013. It was then taken private in a transaction valued at about $6.9 billion. The acquirers included Bain Capital and Golden Gate Capital. Five years later, private equity firm KKR (KKR) purchased BMC Software for $8.5 billion.

Now it appears that the company will return to the public markets. BMC Software recently made a confidential filing for an IPO. The estimated valuation is at about $14 to $15 billion.

Are IPOs a good investment?

IPOs can be a great way to invest in early stage growth companies. And yes, the gains can potentially be massive.

Then again, the risks can be substantial. “Market history is littered with examples of ‘hot’ IPOs that have gone on to become market duds,” said Ed Ciancarelli, senior portfolio manager at The Colony Group.  “Lyft, Inc (LYFT) went public at $72 on March of 2019 after pricing above the expected range of $62 to $68 per share.  LYFT closed the first day of trading at $78 and has not seen that level since.  Such broken IPOs become the victim of an overly exuberant market and unattainable expectations.”

So, an IPO should be considered a higher risk category for your portfolio. For example, it may be best to allocate no more than 5% to 10% in these types of investments.

Before investing in an IPO, you might want to wait until the excitement subsides. “Be patient and wait for the stock price to have its inevitable dip prior to investing,” said Jeff McClean, CEO at Solidarity Wealth.  “Unless you are one of the lucky few who have access to pre-IPO stock at reasonable valuations, patience is the best course.”

Moreover, it is a good idea to read the S-1, a regulatory filing that includes important information about the company that is planning to go public. Make sure to focus on the prospectus summary, risk factors and the letter from the founders.

 

This article was originally published on this site