With the economy still strong and the stock market still flying high, some observers are predicting that 2018 will be a good year for IPOs--better than the past few years have been. That"s probably good news for the current crop of technology unicorns that have gotten deep into the alphabet of funding rounds and must at some point repay their investors. (A "unicorn" is a pre-IPO or M&A startup with a valuation of $1 billion or more.)
With the likely IPO boom in mind, the personal finance site GOBankingRates has come up with a list of likely IPOs for 2018, rating their likelihood of going public next year from high to low. These are the unicorns GOBankingRates thinks are most likely to go public in 2018. You can find the full list here.
1. Airbnb
Valuation: $31 billion
Airbnb has raised $4 billion from investors, including series F funding. It now has 3 million listings and operates in nearly all nations on Earth. It also became profitable in 2016 and is expected to show a profit this year as well. It certainly sounds like a company that"s quite ready to have an IPO.
In an interview with Fortune in October, CEO Brian Chesky said the company "would be ready as absolutely soon as we can." On the other hand, he said, people who expect the short-term rental company to go public in 2018 might be disappointed. "The vast majority of people are saying that you should take your time and do whatever you need to do on your timeline," he explained, adding that some companies have had a tough time once they got out in the markets. "It"s a defining thing," he said.
2. Dropbox
Valuation: $10 billion
Many observers have been expecting Dropbox to go public this year. It"s certainly given many signals that an IPO was in the works, raising a $600 million line of credit from several large investment banks (getting cash without giving up equity is a good sign). Dropbox CEO Drew Houston told Bloomberg earlier this year that the company had positive EBITDA (earnings before interest, taxes, depreciation and amortization--a measure of day-to-day profitability for heavily indebted companies).
Dropbox has 500 million registered users worldwide, and 200,000 business customers (that is, people who actually pay for the service). It recently launched a $19.99 per month "Professional" level of service which some interpreted as a measure to beef up revenues in preparation for an IPO. This one could happen any day now.
3. Spotify
Valuation: $16 billion
Spotify is in the unique position of wanting to sell shares to the public but being blocked so far because the company does not want to go the traditional IPO route. Instead, it hopes to simply list its shares on the New York Stock Exchange without bothering with (or paying for) the rigmarole of having an investment bank set up an IPO. That carries some risks for Spotify, since its share price would immediately be set by the market, whereas an investment bank would work with investors to set the initial price and would likely have buyers lined up in advance.
Still, with 60 million paying subscribers, Spotify is in a pretty good position to do what it wants. Its continued success in the crowded field of streaming music where competitors include Amazon, Apple, and Google, remains impressive. Spotify execs met with Security and Exchange officials to discuss its unusual plan and lobby for their approval. The company will also need a rules change from the NYSE before it can go forward. There"s a pretty good chance that both will be forthcoming next year. If that doesn"t happen, Spotify may change its mind and go the usual route. Stay tuned.
4. WeWork
Valuation: $20 billion
"One thing we"re not afraid of is going public," WeWork CEO told Fortune back in July. Back then, there was a flurry of speculation that the coworking company would soon have an IPO but so far that hasn"t materialized. Instead, the company raised yet another round of funding, bringing its valuation to $20 billion. It used that money to expand into Asia and Latin America
WeWork has 120,000 members and revenues of about $1 billion a year, so it"s in a good position for an IPO. As GOBankingRates puts it: "WeWork is going public--we just don"t know when."
5. Buzzfeed
Valuation: $1.7 billion
Buzzfeed seemed all set to go public in 2018--but now it looks like it will miss its revenue target for 2017 by 15 to 20 percent. That may mean that the media company"s hopes for an IPO next year may have to wait.
Buzzfeed says it is growing both revenue and visitors to its site,which should be good news for investors. But the growth led to higher costs, and in the digital media industry, ad prices are notoriously low, leaving thin profit margins. So increased costs--and especially missing revenue targets--could be an ominous sign. Still, Buzzfeed has a total audience of $650 million and the site has been profitable. So you never know, it might still happen.
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