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Which IPOs are Due This Year?

Companies whose public offering plans were derailed by COVID-19 are thinking of joining the stock market - but will investors still be keen to buy?

James Gard 11 June, 2020 | 1:28AM
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Deliveroo carrier on bicycle

With stock markets continuing their recovery from the March sell-off and many economies starting to re-open, companies that had put their plans to go public on ice are starting to think about joining the market.

Last week, Warner Music Group (WMG) floated on the US stock market, raising nearly $2 billion from investors, and shares are now 20% higher than than the float price. Other firms are likely to follow this year as investors try to put March's volatility behind them. But how do investors make sure they pick a Peloton (PTON) (up 72% since IPO) and avoid an Uber (UBER), where shares are still 20% below their offering price of $45.

Initial public offerings (IPOs) are a way of private companies offering new shares to the retail and professional investors. Having originally been set up by a small number of individuals (Facebook, Google, Amazon for example) these firms become public entities whose shares can be then be traded on the stock market. In recent years, share prices of some firms listing have skyrocketed on the day of the IPO, attracting the attention of private investors wanting to get in on the action.

Here, we look at some companies that could come to market in this year:

Music Groups
Warner Music’s IPO was scheduled before the March volatility but finally went live on June 3, offering 77 million shares at $25 per share – the shares are now around $30. “We concluded that there was sufficient market momentum. Without ever trying to time the market this looked like a good time to go,” said Warner chief executive Stephen Cooper. The company – which has artists such as Ed Sheeran, Dua Lipa and Bruno Mars on its books – has benefited from the wider trend of music streaming, which has seen a spike in lockdown.

Rival outfit Universal Music Group is also slated to go public this year and according to Pitchbook data, the company is valued at around $33 billion.

Airbnb
One of the most anticipated floats of 2019 was the travel industry disruptor, Airbnb. Recent events have put the industry into a deep freeze, but people are starting to book accommodation again and short-haul airlines are planning to restart flights.

While a return to full normality in the travel sector is unlikely, industry experts are predicting some semblance of a rebound as once-housebound tourists look to book summer holidays - however, staycations look to be a likely trend as many would-be tourists will be keen to avoid air travel.

Airbnb said recently it expects to float this year. Broker firm IG expects it to be valued around $38 billion if it does list on the stock market.

Deliveroo
Lockdown has seen a surge in demand for food delivery services and there are plenty for hungry customers to choose from, including Just Eat Takeaway (JET). Jack Neele, Portfolio Manager at Robeco, holds Just Eat, and think many first-time customers of these companies will come back for more even when lockdown lifts.

Just Eat's shares are up around 19% year to date, and that upward trajectory may well encourage some of its rivals to step into the stock market.

Deliveroo, for example, recently received an investment from Amazon (AMZN) after a potential tie-up with Uber – which has its own food service, Uber Eats – fell through.

Pitchbook data shows that “foodtech” companies brought in $5.3 billion in venture capital in Q1 2020, a 23% increase on the year, but its analysts say the uncertain economic environment makes valuations hard to pin down.

Another One to Watch
One of the biggest US IPOs slated for this year is data mining and artificial intelligence firm Palanatir, which was set up by PayPal founder Peter Thiel. With an estimated $40 billion valuation, the size of this float could dwarf Airbnb.

 

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About Author

James Gard

James Gard  James Gard is senior editor for Morningstar.co.uk.

 

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