The initial public offering (IPO) market has remained mostly a ghost town after a stellar 2021. Last year was one of the worst on record, with a measly 70 offerings and $7.7 billion raised, according to Renaissance Capital. But we might start to see signs of life again in the coming months, with investors preparing for some of the most anticipated upcoming IPOs to hit the market in the next few months.
There has already been some improvement this year. For the second quarter, the amount raised came to $6.6 billion and there were 23 IPOs.
However, the implosion of Silicon Valley Bank is a major factor in depressing recent deal activity. This wreaked havoc on the financing market for startups, and added to continued worries about slowing economic growth, persistent inflation and high interest rates.
But investors should not give up hope.
IPO market could rebound
“We believe the summer IPO market is poised to capitalize on several positive developments from the past quarter: The pause in rate hikes, the pickup in larger deals at quarter end, and improving returns, with the Renaissance IPO Index up 32% year-to-date,” writes Renaissance Capital in its second-quarter IPO market review. “The backlog appears brimming with solid IPO candidates, and we expect a steady rise in listings in the second half.”
Encouragingly, Johnson & Johnson’s (JNJ) recent spinoff of its consumer health products division Kenvue (KVUE) raised $3.8 billion. And immediate excitement around the mid-September Arm IPO, which brought in $5 billion of new capital for the Softbank-owned chipmaker, bodes well for high-quality companies set to go public over the next year.
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, and this list of eight is a smaller number than we typically expect at this time of year because of recent market weakness. Still, I focused on large, more established names that should generate plenty of excitement on Wall Street and Main Street alike.
New and upcoming IPOs
|Company||Industry||Expected IPO timeline|
|BMC Software||Consulting enterprise software||2023|
Founded 30 years ago, Arm is one of the world’s largest semiconductor companies. It has shipped more than 230 billion chips across the world and its technologies impact about 70% of the world’s population.
Arm reported $2.68 billion in revenue in its fiscal year ended March 31, down slightly year-over-year, and shipped more than 30 billion chips. The company is seeing growth across all market segments, with strong results with automotive and IoT (Internet-of-Things) solutions.
In September 2020, rival chipmaker Nvidia (NVDA) agreed to buy Arm from its owner, SoftBank Group, for $40 billion. However, the deal became subject to intense antitrust scrutiny, and the parties abandoned the proposed acquisition in early 2022.
Arm went public on Thursday, September 14, trading under the ticker “ARM” on the Nasdaq Global Select Market. The company is priced its offering late Wednesday at $51 per share, the high end of its previous range.
ARM opened at $56.10 on its first day of trading, giving the company a roughly $60 billion valuation. Shares reached $66.28 in intraday trading before settling at $63.59.
The deal has been one of the hottest upcoming IPOs to watch – and will likely make ARM one of the best semiconductor stocks to watch going forward.
Instacart, which operates a grocery-delivery network, experienced a surge in growth because of the pandemic. But as the impact of COVID-19 fades, it’s been tougher for the company.
Another problem is competition. Besides having to deal with online rivals like Uber Technologies (UBER) and DoorDash (DASH), there are also traditional operators that have entered the market. Some of the largest include Dow stock Walmart (WMT) and grocery chain Kroger (KR).
To find new opportunities, Instacart has diversified into other categories. For example, it launched Instacart Health last September, which delivers healthier products.
Instacart has also been aggressive in adding more stores to its platform. It also expanded its advertising capabilities, and introduced a system to allow for food-stamp payments.
The strategy seems to be working. In fiscal 2022, revenue soared 39% to roughly $2.5 billion and processed $29 billion in total sales on its platform, according to The Wall Street Journal. Instacart is also generating positive EBITDA (earnings before interest, taxes, depreciation and amortization).
Late last year, the company attempted an IPO, but suspended it because of market volatility. However, Instacart is giving it another go and filed paperwork on Friday, August 25, to go public. While there are still plenty of details left to emerge, the stock will be traded on the Nasdaq under the ticker “CART,” and the company is expected to price its shares between $26 and $28.
Reports are swirling Instacart could go public as soon as this month, making it one hottest upcoming IPOs to watch for in the near term.
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. This deal is likely to happen in the second half of 2023.
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. Still, the company in late 2021 announced its latest funding. It raised $1.6 billion at a valuation of $38 billion. Some of the investors include Amazon Web Services, CapitalG – the venture fund of Alphabet’s (GOOGL) Google – and Microsoft.
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 is on track for an IPO in 2023. “They have since seen strong growth and have grown into their last valuation,” he said.
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.
In 2012, Andrew Bialecki and Ed Hallen cofounded Klaviyo (the name is an inspiration from the Spanish word for mountaineering pins or pitons). They set out to build a platform to help manage data.
In a few years, the company started to focus on helping customers with targeted and personalized marketing, such as with emails and text messages. Even though the space was intensely competitive, Klaviyo was able to stand out because of its deep expertise with data analytics. It also leveraged a strategic partnership with large-cap tech stock Shopify (SHOP), which last year made a $100 million investment in Klaviyo.
Currently, Klaviyo has over 130,000 customers, including Unilever (UL) and Citizen Watches. In the first half of 2023, the company had net income of $15.2 million on revenue of roughly $321 million.
In late August, Klaviyo fired IPO paperwork with the Securities and Exchange Commission (SEC). According to the filing, the company plans to list on the New York Stock Exchange and will trade under the ticker symbol “KVYO. The company is hoping the deal will fetch it an $8.4 valuation based on its pricing of $25 to $27 per share. The IPO is expected in September 2023.
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.
This article was originally published on this site