Investing in IPO Stocks: The Biggest of All Time and What’s to Come

This article is about companies going public, both those that have been listed recently, and those seeking a stock exchange listing sometime in the near future. Such companies offer the potential for sizeable gains, and we will be exploring some examples to illustrate this, though naturally — like all stocks — some newly-floated companies may thrive, while others may not.

It is an interesting time for new companies coming to the market, deep as we are in a multi-year bull run. Things were looking very sunny for Wall Street investors in general by late September 2018, with US stock indices pushing to new record highs, after having lost some momentum during the summer months.

The autumn months saw volatility return to the market, however, this came along with some heavy downward pressure on share prices. As the US stock market headed into the Thanksgiving public holiday, the main index benchmarks were actually down for the year: for instance, the S&P 500 fell by by 0.89% and the Dow Jones fell by 1.0%.

Despite this pressure on the stock market as a whole, you might be surprised to learn that some of the newer stocks added to the market have managed to hold on to the gains that they made this year. A handful of these IPO stocks actually boast extremely healthy gains still. Sound appealing? Then read on — we'll move on to the ins and outs of these gains shortly — but let's first explain precisely what we mean when we talk about IPOs and IPO stocks:

IPO Stocks: An Introduction

An IPO is an Initial Public Offering. This is what we sometimes call going public or floating on the stock market. Basically, it is a previously privately-held corporation selling its first offering of stock to the public.

Companies offering stock in such a way are often reasonably new and small companies, seeking to bring in greater funds through the sale of this stock, in order to finance future growth. We should note, of course, that this by no means has to be the case. Not all companies offered in an IPO are small and some can be vast — as was the case with Chinese internet retail giant Alibaba.

If you are interested in trading stocks yourself, why not open an investing account with Admiral Markets? You can gain access to 15 of the largest stock exchanges from around the world, at no cost. In addition, you can access and invest in thousands of stocks, all while effectively managing your portfolio with the MetaTrader 5 trading platform! Click on the banner below to open your Admiral Markets Investing account today!

Alibaba: The Biggest IPO in History

One of the bigger success stories of IPOs in recent years was Alibaba's flotation on the New York Stock Exchange in September 2014, with the ticker BABA. It was, in fact, the largest IPO in history. Its share price opened at $92.70 on its first full day of trading on NYSE and just over four years later, on 27 November 2018, its share price closed at 156.46.

This meant that there was an increase of 69% from that opening price. The Chinese internet sales giant is the world's largest retailer, with a market capitalisation at the time of writing of $404.4 bn. To put that into context, that's larger than Facebook!

The company recently set a new record with its sales for 'Singles Day', vending merchandise worth more than $30.8 billion in a span of just 24 hours. By way of comparison, widely reported estimates for 2018's record Cyber Monday sales put US online sales at $7.9 billion — that's all of the US online retailers combined!

IPOs: Biggest of all Time

There are a number of companies that have floated this year and have seen their share prices thrive. The following table shows five such companies with double-digit growth, or greater:

We have to stress, of course, that this performance to date is no promise of future gains, but it is remarkable that these fledglings of the stock market have achieved such strong performance, in spite of recent headwinds. So what other new flotations are in the pipeline? Let's move on now to discuss just a few of these:

Last Year's Biggest IPOs

2019 was a big year for tech IPOs, with some companies going public including Uber, Lyft, SmileDirectClub and Change Healthcare.

Uber

CEO Dara Khosrowshahi, the former chief of Expedia, took over the reigns at Uber in the summer of 2017 and identified 2019 as a target for an IPO. The Wall Street Journal reported in October 2018 that the value of such a flotation could be as high as $120 billion, based on underwriting proposals from Goldman Sachs and Morgan Stanley.

When the company offered 180 million shares on Friday May 10, 2019, shares were priced at $45, valuing the company at $82.4 billion.

Lyft

When we talk about Uber, it's natural to talk about its rival Lyft as well, as the two companies have been fighting for market share in this relatively new field for several years now. While Uber operates in a large number of countries across the globe, Lyft currently operates solely in US and Canada. Estimates gauge Lyft is currently holding around 32% of the US rideshare market.

Lyft went public on March 29, 2019. The company priced its IPO at $72 a share, only to have it spike 21% on launch to $87.24!

Change Healthcare Inc.

Change Healthcare is a software-as-a-service platform that is changing medicine. The company has created a platform that includes a full set of software, analytics, technical services, network solutions and payment systems. Their aim is to optimise the interaction between patients, pharmacies, hospitals and research laboratories.

In their IPO on June 27, 2019, Change Healthcare Inc. aimed to raise $1 billion, with the expected price offering of $16 to $19 per share totalling $936.4 million. Instead, the stock released at $13 under the ticker CHNG. This was below the expected range, and brought the company's total market capitalisation to $557 million.

SmileDirectClub

SmileDirectClub was one of September's largest IPOs, with 58.5 million shares of the SmileDirectClub being released at $23, above the $19-$22 range. This gave the company a valuation of $9 billion, nearly triple it's $3.2 billion valuation less than one year ago in it's last round of funding!

So what is SmileDirectClub? SmileDirectClub believes that everyone deserves a smile they love. How do they achieve this? With direct-to-consumer teeth straightening products. While traditional orthodontists charge between $5,000 and $8,000 for a procedure, SmileDirectClub's products are often below $2,000 and can give customers a new smile in just 6-10 months. Established in 2014, the company has grown to $622 million in trailing sales.

Companies Going Public in the Future

There are a number of expected upcoming IPOs that are highly anticipated, featuring well-known tech stocks with potentially huge valuations. 

Airbnb

Online home-rental company Airbnb announced in late November 2018 the appointment of longtime-Amazon executive Dave Stephenson as its Chief Financial Officer (CFO), removing at least one of the obstacles in the way of an IPO. Of the move, the startup's CEO Brian Chesky stated in an official press release that Airbnb was just getting started.

In the years ahead, Dave will be Airbnb's quarterback for long-term growth." Chesky has previously stated that Airbnb will be ready for an IPO in 2019, and the company revealed in November 2018 that it had generated revenue of more than $1 billion in the third quarter of 2018.

Ant Financial

Ant Financial is a financial technology affiliate company of Chinese e-commerce leader Alibaba (NYSE: BABA).

It runs one of the most popular mobile payment service in China called "Alipay" and is also operating an investment fund and an online bank. Already in 2018, rumours made rounds that Ant Financial might go public with signs around an IPO intensifying for 2020.

Gitlab

Gitlab markets a platform that helps software developers improve their productivity. What's special about Gitlab is that it is delivered as a single application, meaning that all features developers might need, they get right out of the box.

Gitlab is already well-known among developers, with already more than 100,000 organizations across the world using its development platform. The IPO is planned for late 2020 on Nov. 18.

IPO Stocks: to Invest or Not?

We've looked at some interesting success stories, along with some other companies that may potentially join the stock market in the future. As with investing in the stock market in general, you need to pick wisely. You should read about who is running the company, and weigh up the long-term prospects of the company's business model, in order to aid your decision-making process.

Other articles that may interest you:

• Copy Trading With MetaTrader: How to
• Seasonal Patterns of Financial Markets: A complete guide
• What is Institutional Trading? The All You Need to Know Guide
  
  

Frequently Asked Questions

INFORMATION ABOUT ANALYTICAL MATERIALS:  

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:  

This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.

With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.

The Analysis is prepared by an independent analyst (hereinafter "Author") based on personal estimations.

Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.

Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.

Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.