With major indexes hitting bear market territory in 2022, many private companies have been reluctant about going public via an initial public offering (IPO). The stock market has been hit by inflation and the Fed’s cure is raising interest rates, pushing the market lower in the short term.
One of the worst starts for the market ever has all but shut the IPO window for many high-profile names, which want a good valuation on their stocks when they do go public.
But if the market turns up – a possibility later this year, say some experts – companies are ready to hit the window and go public. Here are seven hot names that may conduct their IPO in 2022.
List of hot upcoming IPOs to watch
Last year was a record-breaking year for IPOs, as more than 1,000 companies hit the market in 2021, according to Barron’s. Collectively these companies raised more than $315 billion in funding. That was double the number of IPOs in 2020 (457), raising a total $168.7 billion, says Barron’s.
But 2022 has already been lackluster, as the poor market environment keeps potential IPOs on the sidelines. The total raised through the first half of 2022 is a scant $4.9 billion, says Bloomberg, just 6 percent of what was raised in the comparable 2021 period.
“IPOs have been drastically reduced because of the volatility of the market, the uncertainty in inflation and the war in Ukraine all leading to fears of a recession,” says Dan Casey, investment advisor and founder of Bridgeriver Advisors in Bloomfield Hills, Michigan.
Now companies are loath to raise money from investors, as valuations are slashed due to adverse conditions. They’d prefer to tap the markets when “animal spirits” – and valuations – are running high and they can receive a higher price for the shares that they issue.
While the actual debut of companies has markedly slowed, that hasn’t stopped them from lining up the process with the Securities and Exchange Commission (SEC). The SEC already has a backlog of filings in the past year for 185 companies looking to IPO, according to Bloomberg. And that doesn’t include small firms that haven’t yet announced their plans publicly.
But when will these companies get to market?
“Once volatility decreases and the uncertainty works its way through the market, the IPOs should kick in again,” says Casey. “And with the backlog, we should see a steep increase in IPOs.”
That means if the market picks up later in 2022, companies may rush to hit the open funding window. Even if the downturn extends into 2023, the backlogged companies are still ultimately looking for an IPO, so when the market does snap back, a flood of IPOs will likely soon follow.
Here are some of the most likely and high-profile candidates to hit the market the soonest.
Is it an initial public offering if the company has already been public? Technically yes. That’s the situation with Mobileye, the purveyor of advanced driver assistance systems, which went public in 2014 before being scooped up by Intel in 2017. Intel is looking to take the asset public again to capitalize on Mobileye’s fast growth – revenue rose 43 percent in 2021. Automotive systems and electric vehicles have been hot properties in the IPO market, and Mobileye has reportedly targeted a $50 billion valuation.
VinFast is an electric vehicle manufacturer out of Vietnam, and it’s looking to capitalize on the ridiculously strong investor appetite for companies such as Tesla and Rivian. VinFast expects to start delivering SUVs to the U.S., Canada and Europe by the end of the year. It’s also planning to open a factory in the U.S. by 2024, according to Bloomberg. The company has looked for a valuation that’s big enough to drive an electric vehicle through – $25 billion to $60 billion.
Reddit is the so-called “front page of the Internet,” and it operates one of the most popular sites for engaging in discussions with others who share hobbies and interests. Reddit blasted into popular consciousness in 2021, as it was the epicenter of stock traders who propelled GameStop stock into the stratosphere. Reddit last raised money at a $10 billion valuation, garnering more than $400 million in funding from Fidelity Investments in August 2021.
While the global pandemic hit many businesses hard, one company that seemed to thrive during the tough times was Instacart, the app that delivers groceries and other goods to your home. Instead of venturing out, consumers stayed safely at home and ordered their food in. In March 2021, Instacart completed a funding round that valued the company at $39 billion, led by top venture capital firms including Andreesen Horowitz. Instacart has been rumored as an IPO candidate for the last couple years – 2022 could finally be the year it goes public, though. But the company slashed its valuation by about 40 percent in May 2022, as markets plummeted.
Stripe is a payments processor for e-commerce businesses, and it has also ridden the wave of online shopping, which notched higher during the pandemic. But Stripe has also ventured into loans and tax management, among other areas. Stripe also boasts the support of major venture capital investors including Andreessen Horowitz, Kleiner Perkins and Sequoia Capital. A $600 million funding round in March 2021 valued the company at a whopping $95 billion, making it the most valuable private fintech company. This high-profile company has been a rumored IPO for a while, but the company has said previously that it’s in no rush. Time will tell here.
If you’re into video games, you’ve probably heard of Discord, an app that offers instant messaging, voice and video calls. Basically, what Slack or Microsoft Teams are to the work world, Discord is to the gaming world. Growth has been brisk. Discord’s monthly active users soared from 56 million in 2019 to 150 million by the end of 2021, according to CNBC. Microsoft approached the chat app in 2021 about being acquired, for a reported price of at least $10 billion, but no deal materialized. A funding round in September 2021 valued the company at $15 billion.
Software created around the needs of various business types is a perennially hot asset, and ServiceTitan provides home service providers – think, plumbers, electricians and the like – with a way to manage their businesses. ServiceTitan’s offering covers such processes as payroll, job scheduling, marketing and more. Its last funding round in June 2021 saw the firm valued at $9.5 billion, and it boasts sponsors such as Tiger Global and Sequoia Capital. The company is reportedly trying to reach a valuation as much as twice that most recent valuation.
The number of IPOs tend to soar when the market is hot, and while it is, companies are anxious to tap the available funding and garner an attractive valuation. But the IPO market won’t pick up until the broader market does, and financial markets have shown few signs of turning around. In fact, many investors are whispering of a recession, which could ice the IPO market even longer.
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