2019 was an interesting year for start-ups debuting on the market, as Wall Street had been on a bullish streak for several years. In 2020, however, the uncertainty caused by the corona pandemic caused some companies planning to debut on the stock exchange that year to postpone the operation.
In 2021, although there were still some limitations, global Initial Public Offering (IPO) activity resumed and even reached record levels. This article is everything you need to know about the next IPOs.
What is an IPO?
A public offering is a transaction in which one or more shareholders of a company offer all or part of their shares for sale on the stock exchange.
This offer can be launched both by companies that are not yet listed and by companies that are already listed and whose majority shareholders wish to sell their shares.
In a nutshell, this is a company that was previously private and is now selling its first offering of shares to the public, i.e., offering part of the company for sale for the first time.
However, not all companies offered in an IPO are small and some can be huge, as was the case with Chinese internet retail giant Alibaba.
What is the difference between an IPO and an SPO?
An Initial Public Offering (IPO) also refers to an IPO, but of a company that is already listed on the stock exchange and wants to increase its capital, for example.
How does an IPO work?
Whether we are talking about an IPO, an SPO or a DPO, companies have to follow a very complex process. First, they have to hire an external audit that clarifies their financial health and meets all accounting and governance requirements.
Once it has the auditor’s approval, the company will have to prepare a “prospectus” for the market regulator, where it will go public. In this prospectus, it must make clear the conditions of the operation (number of shares it will bring to the market, what method it will use to sell them, to whom they will be directed, etc.). If the regulator gives the green light, the investment banks will value the offering and set an exit price for the shares.
Top IPOs in 2023
The year 2022 has not been very active in terms of IPOs. Fears of a global recession and financial market volatility due to the conflict in Ukraine and high inflation have dampened IPO activity. In the first half of 2022, volumes fell 46%, while sales were 58% lower than in the previous year.
The 10 largest IPOs in terms of proceeds raised a total of $40 billion, with energy being the most active sector, replacing the technology sector, in terms of proceeds, as in terms of number of IPOs, the technology sector continues to lead.
Another important development relates to SPACs, a vehicle created solely to acquire one or more companies and facilitate their IPO. Although this vehicle gained prominence last year, it has slowed down this year due to increased regulatory uncertainty.
In the first half of the year, few IPOs generated much interest in the markets, as the most anticipated ones were postponed by investors awaiting greater confidence. Here are some of the most closely watched IPOs of 2023:
Stripe IPO
Stripe is an American digital payments’ startup. Its debut is one of the most anticipated as it competes in valuation with another company that could also go public in 2022, ByteDance, the parent of TikTok.
The growth of the Chinese social network has been spectacular, and it has already become a widely used tool in advertising and marketing. Hence, its possible IPO in 2023 is one of the most eagerly awaited.
MobileEye IPO
Intel’s subsidiary dedicated to technologies applied to autonomous cars plans to go public before the end of 2023. The operation could reach 50 billion dollars.
Discord IPO
The messaging app, widely used among video game users, is also planning to go public after a possible purchase by Microsoft failed. With a valuation of US$15 billion, it also has the market’s attention.
Reddit IPO
Reddit is another company valued at about $15 billion. It is a social network that focused the attention of the market and the economic media in 2021, when a group of users organized to buy shares of Gamestop. Investment funds that had bearish positions in that stock were forced to close positions at a loss or buy back shares, making them even more expensive.
What other companies will go public in 2023? We will have to keep an eye on the financial markets, as many IPOs will be decided on the basis of volatility and the evolution of macroeconomic data.
Why are Initial Public Offerings important?
IPOs allow companies to raise significant capital by offering shares to the public. This capital can be used to finance the company’s growth, invest in research and development, expand operations, pay down debt or acquire new assets. It is an efficient way to raise funds to fuel business growth.
In addition, IPOs provide existing shareholders, such as founders, venture capitalists or employees, with the opportunity to sell their shares on the open market. This provides them with an avenue to obtain liquidity and monetize their initial investment.
And last but not least, by executing an IPO, a company becomes more visible to the public, institutional investors and financial analysts. This can increase the company’s reputation and prestige, which in turn can generate greater interest and trust from customers, suppliers and business partners.