As the IPO market slowed down at the end of 2021, companies that had been expected to jump on the hot market were left out in the cold, but many of them are still expected to test the waters in 2022.
Technology companies dominated the market for initial public offerings in 2021, representing nine of the 10 largest deals, according to David Ethridge, the U.S. IPO services leader at PwC. And with companies staying private longer, there remains a deep backlog of mature technology companies that could finally make their debuts in the year ahead.
Among the most highly anticipated candidates within the tech sphere are social-networking platform Reddit, grocery-delivery service Instacart, and data-analytics company Databricks. And following what Rainmaker Securities managing director Greg Martin called a “banner year for fintech” deals, more attention will be focused on Stripe, which notched a $95 billion private-market valuation this year but has thus far resisted the public markets.
Here’s what to watch for among tech and fintech IPOs, and beyond, in the year ahead.
Late to the gig IPO party?
Instacart had its moment at the height of the pandemic, as lockdowns drove more people to try out grocery delivery. But unlike fellow gig-economy player DoorDash Inc.
which went public in December 2020, Instacart has held off on an IPO, instead going through some management changes and working on new growth initiatives.
Chief Executive Fidji Simo, a Facebook
veteran, has been at the helm since the summer, and Instacart could be inching closer to a debut, potentially in the second half of 2022. New CEOs typically need nine months to a year leading their companies before they can launch into an IPO, according to MKM Partners analyst Rohit Kulkarni, and Instacart in particular may also need a few more quarters “to go through all these reopening headwinds.”
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The company was last valued at $39 billion in a March 2021 private funding round. One key question is whether the company can live up to that valuation in an IPO that takes place during something more closely resembling post-pandemic times.
“It’s hard to replicate what they did in 2020,” said Martin, whose platform Rainmaker Securities allows for the trading of pre-IPO shares in private companies. “The valuation may have gotten a bit ahead.”
An Instacart spokesperson declined to comment about the company’s IPO ambitions.
The ultimate WallStreetBet
Reddit has helped launch meme stocks, and now the company looks closer to having a stock of its own. The message-board company announced in December that it has filed confidential paperwork with the Securities and Exchange Commission for a potential IPO after being valued at about $10 billion in an August funding round.
Reddit is perhaps best known in the investment community for its WallStreetBets “subreddit,” a forum on which users discuss stock picks and other topics around trading. The company makes money through advertising and a paid membership tier through which users can browse the app without ads and access other perks.
As a private company, Reddit has avoided some of the scrutiny that fellow social-media companies Twitter Inc.
and Facebook-parent Meta Platforms Inc. have faced over their roles in the spread of misinformation online. By going public, Reddit could find more of a spotlight on its practices and policies.
The company reportedly is on track to generate $350 million in revenue this year, according to The Information, at least double its 2020 total.
Reddit may not be the only social platform to test the public markets in 2022, with Martin noting that he’s seen strong secondary-market demand for Discord on his platform, suggesting that the company is one to “keep an eye on” in the year to come.
“We don’t have anything to say at this time,” a Discord spokesperson said in response to MarketWatch’s inquiry about potential IPO plans.
The year of Stripe?
Likened to Amazon.com Inc.’s
AWS cloud-computing business except for payments infrastructure, Stripe helps power many hot tech companies, including Lyft Inc.
Peloton Interactive Inc.
and Shopify Inc.
Similar to Square-parent Block Inc.
the company provides payment-processing technology, invoicing tools, and business financing, among other features.
But with a private-market valuation of nearly $100 billion, Stripe continues to test the boundaries of how long a hot technology company can avoid the public markets. Will 2022 finally be the year that the fintech giant takes the plunge?
IPO watchers are split on whether Stripe will make its debut. Given the company’s secrecy about potential IPO ambitions, it seems that Stripe executives are content operating the business as a private company, Kulkarni said. He would be “surprised” to see Stripe turn public in the year ahead.
Martin, a shareholder of Stripe, is more upbeat about the chances. “The company is so tightly controlled by the founders, and there’s some sense that they never need to go public,” he said, given that Stripe has been able to offer liquidity for investors and raise new capital easily. Still, he expects the company will hit the IPO market in 2022.
A fintech parade
Stripe isn’t the only hot fintech among rumored IPO candidates. The year ahead could bring “five or six massive ‘decacorn’” IPOs in the fintech space, said Martin, acknowledging that Stripe’s would actually be a “centicorn” deal given that the company is hovering around a $100 billion valuation.
Swedish fintech company Klarna is one highly anticipated name, especially since its buy-now, pay-later rival Affirm Holdings Inc.
was one of the biggest IPO market successes of 2021. Like Affirm, Klarna lets consumers split purchases into installments. The company was valued at $46 billion through a June funding round.
The buy now, pay later wave: Afterpay, Klarna, Affirm and rivals hope to take U.S. by storm
Though based in Europe, Klarna could make more of a splash if it chose to debut on a U.S. exchange, said Avery Spear, a data analyst at Renaissance Capital. Doing so would unlock “a bigger pool of capital,” she continued.
A Klarna spokesperson said that the company doesn’t comment on IPO plans and that “this is a matter only our CEO can speak to.”
Other possibilities include Revolut and Chime, neobanks privately valued at $33 billion and $25 billion, respectively. They would follow Nu Holdings Inc.
a Brazilian company that runs Nubank, which came public in early December.
A Revolut spokesperson said the company is “focused on reaching sustainable profitability,” and an IPO is not being considered or discussed at the present time. Chime declined to comment on its IPO ambitions.
Martin is also watching Plaid, which nabbed a $13.4 billion private-market valuation in April after its deal with Visa Inc.
was called off. The company makes it easier for people to link their bank accounts to services like PayPal Holdings Inc.’s Venmo. And Brex, which provides credit cards and other financial products to businesses, also cracks his watch list. The company secured an October funding round that valued it at $12.3 billion, according to TechCrunch.
For more: Visa and Plaid call off $5.3 billion merger after Justice Department objection
Plaid declined to comment on its IPO plans. A Brex spokesperson said the company didn’t have comment on its plans.
“The fintech companies will definitely dominate 2022,” Martin said.
The next Snowflake
reception on Wall Street has been anything but chilly, and another trendy cloud company may be looking to achieve a similar fate.
Databricks, which helps companies process and analyze data, “has been a long anticipated IPO,” said Kulkarni, and it may finally make a jump to the public markets in 2022. The company has nabbed a $38 billion private-market valuation.
A Databricks spokesperson said the company didn’t have further comment beyond what it has already said publicly. Chief Executive Ali Ghodsi said that he expects the company to eventually come public in the “not-too-distant future” when speaking to CNBC in December.
See also: Five things to know about Snowflake
Other software names on Kulkarni’s watch list include Tanium and Canva. Tanium “operates in an extremely attractive end market” by providing cybersecurity services, he said. Canva, based in Australia, makes design software that challenges offerings from Adobe Inc.
Elsewhere on the horizon, social-media management company Hootsuite might be aiming for an IPO, per Santosh Rao, the head of research at Manhattan Venture Partners. The Canadian company was founded in 2008 but it doesn’t appear to be profitable yet, which could be problematic given current market attitudes, in his view.
“Even the big guys are getting punished for not showing any profits after so long,” Rao said. The company reportedly was aiming for an IPO in Canada “before Christmas,” according to Betakit, a publication that covers Canadian startups. That offering never materialized.
Fanatics recently scored a deal to replace Topps as the maker of Major League Baseball trading cards, and the sporting company could soon be heading for the big leagues itself. The MLB deal shook up the industry enough that Topps and Panini, two big card makers, both shelved their own IPO plans after Topps won the baseball business.
Last valued at $18 billion in August, the company recently scooped up former IAC/InterActiveCorp.
chief financial officer Glenn Schiffman to serve in the same role at Fanatics, which could be a sign that the company has IPO ambitions.
Read: What the Fanatics deal means for baseball cards
Schiffman worked with various online brands at IAC, and his Fanatics corporate bio mentions that he will “drive the financial direction of the company as it expands beyond commerce into new verticals across the sports ecosystem to become a leading global digital sports platform.”
“While an IPO is clearly an available option to us, there is no update on any timeline,” a Fanatics spokesperson told MarketWatch. “Any public offering is just a moment in time as our focus remains on expanding the business and building the leading digital sports platform over the next decade and beyond.”
Impossible Foods once seemed like a likely IPO candidate for the beginning of 2022, according to Martin, but he’s seen secondary-market demand cool off for the maker of plant-based meat. Publicly held rival Beyond Meat Inc.
has seen its stock price roughly cut in half during 2021, which could be impacting sentiment toward Impossible as well.
The company, which raised roughly $500 million in a November funding round, still remains a name to monitor, especially if Beyond Meat shares fall back into favor on Wall Street or if the company’s financials look better than Beyond’s. Impossible hired a former fintech exec as its permanent chief financial officer in August, which could signal an effort to get the books ready for Wall Street.
Private equity coming public
One of the more likely IPO bets for 2022 is TPG Partners LLC, a private-equity firm that has already filed its prospectus with the SEC. The company’s sizable roster of 23 underwriting banks suggests that TPG could be headed for a large offering, perhaps raking in upward of $1 billion.