Get ready for the $200 billion IPO shakeup in 2019


  • Uber and Lyft lead a handful of Silicon Valley multibillion-dollar companies founded during the last recession that may go public in 2019.
  • With many economists forecasting a recession by 2020, it seems these rideshare companies, as well as other rumored IPO candidates, such as Airbnb, Slack and Palantir, may be racing against a recession clock for deals that in all could reach more than $200 billion in valuation.
  • History shows the IPO market does suffer when stocks and the broader economy tank, but big names like Uber and Lyft can likely get deals done in any market. They just may have to swallow lower deal pricing than they want.

Photo: NYSE
Tencent Music Entertainment Group (NYSE: TME) celebrates its initial public offering and first day of trading on the NYSE on Wednesday, Dec. 12. The deal was priced lower than initial expectations given the weaker overall market, but did rise in first-day trading. But it slipped below its $13 offering price by the close last Friday.

Two recent deals in the initial public offering market show the problem that Uber, Lyft and other multibillion-dollar private Silicon Valley companies, such as Airbnb, Palantir Technologies and Slack, will face if they proceed with IPOs in 2019: finding a deal price that investors will support rather than pummel right from the first day of trading.

With all three major U.S. stock indexes ending last week in correction, and more economists forecasting a recession by 2020, these IPO candidates — some already filed and some just rumored — are racing against both a softening stock market and a recession clock for deals that in all could reach more than $200 billion in valuation.

Moderna Therapeutics went public in the largest biotech offering ever earlier this month, raising more than $600 million. It didn’t price at the high end but rather the mid-end of its range, and shares of Moderna have been destroyed since, down roughly 20 percent since it opened.

Tencent Music gave the market a minor surprise by getting its deal done this week among the volatile market conditions and economic weakening in China, its home base. To succeed, Tencent had to price at the low end of its range, $13, a concession that has led to shares holding close to the $13 level in their first few days of trading. No pop that is customary for post-IPO first trades (18.7 percent for IPO first-day trades on average from 1980 to 2017), but no tanking.

Uber, Lyft, Palantir and Slack — all which have spent multiple years on the CNBC Disruptor 50 list — are considering IPOs that, according to recent reports, could reach a combined valuation over $200 billion, with Uber getting most of it: Uber ($120 billion), Lyft ($15 billion to $20 billion), Palantir ($41 billion), Airbnb ($31 billion) Slack ($7 billion).

Yet the companies need to weigh what investors will bear in terms of pricing. Some reports have insinuated that Uber and Lyft may be rushing to get deals done — both recently filed confidentially for IPOs. But the truth may be that their time to go public has simply come and they were never going to get to choose the perfect market conditions.

“I don’t like the narrative that ‘they know it is the top,'” said Kathleen Smith, principal at Renaissance Capital, which provides IPO research and manages IPO ETFs. “It takes time for these companies to go through the process. It is hard going public, and it very well may be that they were working on IPOs all year.”

Smith said 2017 or the first half of 2018 might have been a better time to get an IPO done, but venture investors want an exit, and pricing pressure on deals is the price these highly valued start-ups may have to pay.

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