This time last year, the outlook was bright for 2019’s IPO market. The word coming from Silicon Valley was that a number of unicorns were getting ready to prance down the street. (No IPOs are set for January 2020’s first week; more on that later.)
A unicorn is a privately owned company with a valuation of at least $1 billion or more. The current list of these companies waiting to go public consists of 432 unicorns with a total cumulative valuation of $1,331 billion (in other words, $1.33 trillion) according to CBInsights. That data shows a jump of 41.2 percent in the number of unicorns from a year ago, when CBInsights reported that the Global Unicorn Club had 306 unicorns; their total cumulative valuation was $1,031 billion.
When Unicorns Stumble
The word around Wall Street is that unicorns have huge revenues and money-losing operations. By year’s end, their IPOs had mostly flopped in the aftermarket. In January 2019, names such as Lyft and Uber were among the leading unicorn IPO candidates. They made their public debuts, along with some others.
Let’s take a look at a few unicorns from 2019 and where they ended the year, compared with their initial public offering prices:
- Lyft (LYFT): On March 28, 2019, 32.5 million shares were priced at $72 each to raise $2.34 billion. The IPO closed its opening day at $78.29. On Dec. 31, 2019, Lyft ended at $43.02, down 40.3 percent from its IPO price.
- Uber Technologies (UBER): On May 9, 2019, 180 million shares were priced at $45 each to raise $8.1 billion. The IPO closed its opening day at $41.57. On Dec. 31, Uber ended at $29.74, down 33.9 percent from its IPO price.
- SmileDirectClub (SDC): On Sept. 11, 2019, 58.5 million shares were priced at $23 each to raise $1.35 billion. The IPO closed its opening day at $16.67. On Dec. 31, SmileDirectClub ended at $8.74, down 62 percent from its IPO price.
- Peloton Interactive (PTON): On Sept. 25, 2019, 40 million shares were priced at $29 each to raise $1.16 billion. The IPO closed its opening day at $25.76. On Dec. 31, Peloton ended at $28.40, down 2.1 percent from its IPO price.
- The We Company (WE proposed): On Aug. 14, the company – the parent of WeWork – filed for an IPO to raise $1 billion. On Sept. 30, the company withdrew its plans to go public.
(For more information on these companies, please check the IPO Profiles on IPOScoop.com.)
2019’s Silver Lining
Nevertheless, on Dec. 31, the U.S. stock indexes closed near their record highs, but the IPO market was just a few steps behind.
There is, however, a silver lining that some may have overlooked: 2019 turned in the best IPO aftermarket performance of the past three years, in terms of IPOs’ average gain for the year. Let’s take a look.
The NASDAQ Composite closed at 8,972.60, UP 35.23 percent for the year. The 2019 IPO market didn’t do quite as well: It closed the year with an average aftermarket gain of 30.29 percent.
Here is the 2019 IPO Scorecard:
- 153 IPOs priced, excluding 60 unit offerings
- 91 Winners
- 62 Losers
- IPOs’ average gain in 2019 – 30.29 percent
- NASDAQ gain in 2019 – 35.23 percent
Here is the 2018 IPO Scorecard:
- 181 IPOs priced, excluding 53 unit offerings
- 69 Winners
- 112 Losers
- IPOs’ average gain in 2018 – 0.26 percent
- NASDAQ gain in 2018 – 3.38 percent
Here is the 2017 IPO Scorecard:
- 151 IPOs priced, excluding 35 unit offerings
- 102 Winners
- 49 Losers
- IPOs’ average gain in 2017 – 27.45 percent
- NASDAQ gain in 2017 – 28.24 percent
Note: IPOScoop.com excludes the following “IPOs” from its head count: Bank conversions, “best effort” offerings, Regulation A+ offerings (which are usually “best effort” offerings), “blank checks” or special-purpose acquisition companies (SPACs), closed-end funds, companies trading on the pink sheets moving up to the NASDAQ, and those foreign-traded securities making their debuts in the U.S. capital markets. The latter are public offerings. Investors can buy the underlying shares on foreign exchanges before their U.S. pricing dates.
First Week of January 2020
At press time, no IPOs were scheduled for pricing this week. However the U.S. Securities and Exchange Commission’s filing window was busy last week as deals started to make their appearances.
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.