The 13 Hottest IPOs to Watch For in 2020

2020 could be a hot year of IPOs despite a few high-profile disappointments last year. Investors finally got their chance to snap up shares in hot companies such as Uber Technologies (UBER), Lyft Inc. (LYFT) and Pinterest (PINS) … but those three and others posted sobering losses for anyone who bought in early.  What went wrong?

Well, the same thing that often goes wrong for IPOs early on: The market for them is fickle. But while the stocks above were money-losers, the average IPO gained…

20% across the year, according to IPO research firm and ETF provider Renaissance Capital. Interestingly, the top-performing sectors for initial public offerings were more traditional fare, such as consumer staples, health care, financials and materials.

One of the biggest obstacles for IPOs last year was the widely publicized implosion of workspace real estate firm WeWork, which had to cancel its planned 2019 offering because the company was running out of cash. It was a stiff reminder that high growth isn’t enough – there has to be a viable path to profitability.

Despite some deserved investor skepticism, however, it still looks like 2020 could rejuvenate IPO enthusiasm.

Here, we look at some of the most prominent IPOs that could happen in 2020. This list includes companies that have filed Form S-1 with the SEC, have unofficially stated their intentions with Kiplinger or other media outlets, or have made moves similar to other firms preparing to go public.

Airbnb

 

During the financial crisis, Brian Chesky and Joe Gebbia were struggling to afford their San Francisco apartment. To make ends meet, they rented out their apartment during an industrial design conference and bought air mattresses for their guests to sleep on. What they called “Airbed and Breakfast” at the time later became Airbnb and re-shaped the home sharing industry.

The initial website was rudimentary, but people still saw the value in the service, and growth quickly followed. Airbnb currently lists more than 7 million accommodations and is available in more than 220 countries and regions. It not only surpassed $1 billion in revenues last year, but also achieved profitability on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis. Based on private market transactions, the company is valued somewhere between $31 billion and $35 billion.

The company has been expanding its platform into other categories. Its Luxe offering is focused on luxury homes with services and amenities. The company also shelled out $463 million last year to buy up HotelTonight – an app for last-minute bookings.

Airbnb announced in September 2019 that it planned on going public this year. Bloomberg reported that the company will pursue a direct listing, instead of an IPO, according to sources familiar with the matter, though that hasn’t been officially announced. In a direct listing, a company will bypass Wall Street underwriters and issue shares directly to the public – a strategy that helps a firm to keep more of what it brings in, but can backfire if the company doesn’t properly gauge demand.

One last note: Airbnb is beset with controversy. Over the years, its rentals have been the center of numerous safety and criminal issues, ranging from voyeurism to even murder. For instance, in October 2019, five people were killed at a “mansion party” held by some of its renters. Airbnb has taken efforts to bolster its screening measures and safety precautions, but its network’s sheer size and the nature of a lodging business essentially run by individuals mean there’s still a high risk of future worrisome headlines.

Albertsons

Albertsons – currently the country’s second-largest supermarket chain – exited the public markets in 2006 when it was bought out by a group of investors including private-equity firm Cerberus Capital Management, CVS Health (CVS) and SuperValu.

The grocery firm has tried to go public multiple times since then. A hoped-for IPO in 2015 fizzled. In 2018, a reverse merger of sorts – one that would see Albertsons buy Rite Aid’s (RAD) shares to join the New York Stock Exchange – ended in termination. But Cerberus is considering giving it another go, with The Wall Street Journal reporting that it’s discussing an Albertsons IPO. The deal would potentially be worth $19 billion, and the company has been updating IPO documents filed with the SEC, the WSJ’s sources say.

A pending threat – industry disruption from Amazon.com (AMZN) – still buzzes in the background. But Albertsons has been making some important changes that might help it better survive on its own. Between Q3 2018 and Q3 2019, the company has dropped its debt load from $11 billion to $8.75 billion; it has innovated its product line, launching more than 1,100 new items over the past two years; and it has invested heavily in e-commerce.

The company also has recorded eight consecutive quarters of growth in identical-store sales – an important retailer metric, often called “same-store sales” or comps, that measures revenues generated at stores open for at least a year.

Casper

 

 

Casper is a next-generation mattress company that says it’s “setting a new standard in sleep innovation.” In its early days, the focus was simple: Ship a comfortable foam mattress in a relatively small box to your home. It has gone on to develop an assortment of other products such as the Wave mattress (which has ergonomic features), a wireless bed lamp and even a dog mattress.

Casper also started out online, but that proved limiting – many people still want to give the mattress a bounce or two before buying. So Casper launched its own brick-and-mortar stores in 2018.

The firm has received funding from a host of celebrity investors including Leonardo DiCaprio, Adam Levine and Tobey Maguire. More recently, it raised $100 million, at a $1.1 billion valuation, from investors including Target (TGT), Crate & Barrel founder Gordon Segal and Canada Goose Holdings (GOOS) CEO Dani Reiss.

Casper officially filed its Form S-1 – a requirement for going public – in early January. Lead underwriters on the Casper IPO are Morgan Stanley, Goldman Sachs and Jefferies.

The company still is growing, though no one will mistake it for a hot tech startup. Revenues through the first nine months of 2019 were $312.3 million, up 20.3% year-over-year, according to its S-1. And that came on a heavy $144 million spend on marketing and advertising. Meanwhile, Casper’s net loss widened from $64.2 million to $67.4 million in that same time period.

Compass

 

 

Compass is creating an end-to-end platform where people can buy, sell and rent real estate. Some of its offerings include:

  • Concierge (a service to help improve the sale of your home with staging, flooring and painting)
  • Bridge loans (the fronting of up to six months of your loan payments)
  • Compass Coming Soon (An early-listing service meant to drive up interest before your home officially hits the market)

Compass, which is powered by artificial intelligence, still has a strong human element. Its 12,000-plus agents make it the largest independent real estate broker in the U.S.

This hasn’t been a cheap buildout. Compass has raised a hefty $1.5 billion since 2012, including a $370 million round in July that valued the company at $6.4 billion.

There are other red flags to consider, too. During the past year-and-a-half, Compass has suffered high-profile departures from the executive suite, including the chief financial, operating and marketing officers. It also might draw some skepticism given that one of its major investors is Softbank (SFTBY), which has been tarnished by its investments in Uber and WeWork.

Nonetheless, Compass is growing rapidly, with revenues up 250% since the second quarter of 2018. And as long as the economy remains robust, the real estate market should still be a decent opportunity.

Just put Compass among the most…

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