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

Reading time: 7 minutes

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.

IPO Stocks

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 Definition: What is an IPO?

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.

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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 — 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!

The Largest IPOs 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:

Company

Ticker

Industry

First trading day

Amount raised in IPO

Alibaba

BABA

Technology

18-Sep-14

$25 billion

General Motors Company

GM

Automotive

16-Nov-10

$20.1 billion

Agricultural Bank of China

ABC

Finance

7-Jul-10

$19.2 billion

Industrial and Commercial Bank of China

ICBC

Finance

19-Jan-07

$19.1 billion

NTT DOCOMO, Inc.

TYO

Telecommunications

22-Oct-98

$18.4 billion

Visa Inc.

V

Finance

18-Mar-08

$17.9 billion

AIA Group Limited

AAIGF

Finance

21-Oct-10

$17.8 billion

Enel

ENLAY

Utilities

1-Jan-99

$17.4 billion

Facebook

FB

Technology

1-May-12

$16 billion

Deutsche Telekom AG

DTE

Telecommunications

17-Nov-96

$13 billion

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:

The Latest IPO Stocks

A number of companies have filed with the SEC for upcoming IPOs. These pre-IPO stocks include some interesting prospects, including Moderna and Virgin Trains USA.

Moderna

Moderna is a biotech company that is less than 10 years old, and was founded in 2011. It filed an updated registration with the SEC on 28 November 2018, and is aiming to raise in the region of $500 million with its IPO, which would be the largest biotech offering ever.

A curious twist to the proceedings is that the company has no products on the market yet, though it does have some medicines, including a cancer vaccine in collaboration with Merck, at the 'in-human' dosing stage. Alongside this, Moderna has already raised billions of dollars via private funds. The company works in the field of MRNA therapeutics, which proposes using messenger RNA to instruct cells to produce proteins to fight disease. Aptly enough, the company wants to be listed with the ticker MRNA.

Virgin Trains USA

Virgin Trains USA, which operates a rail system in Florida, filed with the SEC on 16 November 2018, and proposes floating on the NASDAQ under the symbol VTUS, with a maximum aggregate offering price of $100 million.

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. Let's look at three of the hottest names that may float in 2019.

Uber

CEO Dara Khosrowshahi, the former chief of Expedia, took over the reigns at Uber in the summer of 2017 and has identified the second half of 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. Research suggests that Uber holds more than 60% of the US rideshare market.

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.

Of course, when it comes to growth, being smaller is not necessarily a disadvantage, as there is potentially more room to grow. Reports in October 2018 suggested that Lyft has gained assistance from JP Morgan to help the company go public.

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.

New 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.

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Disclaimer: This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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