The Seville Reporters
In Focus: 2019 IPOs
Thank's for checking out In Focus, our weekly look into a company or market that made the Wall Street news cycle. This week we bring potential IPOs of 2019 in focus.
What is an IPO
An IPO, an Initial Public Offering is when a company that is privately owned makes itself available to public investment. Once public average investor like you and me can buy a stake in the company. Some notable IPO's of 2018 were, Spotify (SPOT), IQIYI (IQ), NIO Inc (NIO), Docusign (DOCU), and Drop Box (DBX). These were just a few of the hundred plus companies that came public in 2018. IPOs allow private companies to raise money from public markets and it allows private investors who invested early a chance to sell their investment.
Builder or Taker of Wealth?
Do IPOs create wealth? They do, but not always for the average investor. However, the owners and investors who were involved when the company was private usually make a killing. Investment related websites, like this one, will tell you how rich you would be if you invested in Amazon's (AMZN) IPO or Google's (GOOGL) IPO or Visa's (V) IPO or Facebook's (FB) IPO or Alibaba's (BABA) IPO. Those are great examples, but there are many companies that have failed and are failing publicly, think Twitter (TWTR) and SnapChat (SNAP), -27% and -73% returns since their public debut respectively.
Would You Like an IPO?
If IPOs are your thing there are some big names that are queued up to go public in 2019. Names and companies that the average person would know and a few names that you may not know but are investor darlings.
The list above are just a few of the bigger names that could go public in 2019. I say could because companies like AirBnB, Pinterest, Uber, and Lyft have all been on this list before in previous years.
Where Should You Put Your Money?
I'm not a fan of failing in public. The companies that are still losing money and not sure when they'll be profitable are the IPOs I try to avoid out of the gate. Investors have been seduced by the Amazon business model, customer growth over everything, worry about profits later. That model does work for some, but it's not a safe business model to invest in, at least for me.
Wall Street is fickle if you didn't already know. Today they will applaud a company's growth, beg and plead for them to go public, and immediately shun and downgrade the company when the quarterly numbers are made public. Company CEO's terrified by the falling stock price begin doing things to please Wall Street instead of bettering their businesses.
Of the 11 companies listed, all have the potential to be the next Facebook (FB), which opened trading to the public at $42.00 per share in 2012, but that doesn't answer the question of where you should put your money?
I like Uber and Lyft, I don't know if either will make a profit anytime soon, and investment in either goes against my stay away from companies that are not profitable idea. But both Uber and Lyft seem to have investor sentiment on their side. As long as the companies can continue to grow users and/or paid rides quarter-over-quarter, Wall Street will continue to throw money at both.
Source: Business of Apps & WeAreTop10.Com
I really like AirBnB. I like the business model, the growing user base, the growing revenue, and what appears to be less issues with it's major competition. I don't hear the hotel industry going after AirBnB like the taxi industry has gone after Uber and Lyft, at least not yet.
The company that's not on this list that I'm looking forward too is Beyond Meat. I've kept an eye on the company since watching a profile piece on them back in 2013 or 2014. The company has had a hard time keeping their burgers and sausages on store shelves in 2018. I am also a vegetarian, so there's that part of it as well.
If I had to pick a company on the list that I think will struggle as a public company it would be Pinterest. I feel their window to go public may have been two or three years ago, and since that time Pinterest hasn't gotten any better. Not to knock it, I'm on Pinterest pretty regularly, but when I think of Facebook from the time I had to use an .edu email address and up to the point when it went public, the platform had changed, they had added so much more. I don't feel that way with Pinterest.
The Secret to Getting Rich From IPOs
It's research and patience, I know that's not really a secret, that's pretty much how you get rich doing anything. The right IPO can be a life changer, but you have to do the work. The research on the company, the management, the market, the companies market penetration, and any existing or potential competitors is where you should start. Don't underestimate the competitor(s) either. Investors who didn't see Facebook as a competitor to SnapChat, because SnapChat labeled themselves a camera company got a rude awakening.
Then it's about patience. A lot of investors jumped into Facebook when it began trading publicly at $40 per share, and then at $35 per share, and even more at $30 per share. Then those investors sold their shares as the stock faded to $14 per share. After lingering at $14 per share for a short while the stock shot up like a rocket; and despite 2018 being the worst year from a public relations standpoint a company could ever have, Facebook is still up over 200% from it's public debut price. The patient Facebook investor was rewarded.
So this is where I leave you this week, with Uber, Lyft, and AirBnB on my IPO 2019 watch list.
If there's a company that you're looking forward to investing in or if there's a company on the list that we should be paying more attention to let us know in the comments.
Thanks again for checking out this weeks In Focus, may your next investment be your best investment.
What is the Seville Report
The Seville Report is our attempt to bring world class investment research to people who feel world class investment research isn't available to them. We also want to demystify the stock market for people who wounding think of putting their money in the stock market. Our research comes quarterly via our newsletter, The Seville Report. We use the website and this blog to share thoughts and ideas about the markets and different companies.
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