What’s in stock for IPOs in 2020 as Casper, Postmates, Airbnb looks to recover from losses?


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2019 was the year of IPOs. Everywhere you looked companies were going public almost in their hundreds if not thousands (pun intended).

Airbnb the short-term rental company, which has exploded in popularity over the past few years, announced that it may seek to file for its initial public offering this year. Its most recent fundraising round resulted in a valuation of $35 billion.

Virtually every unicorn IPO that has gone public in the past couple of years has not even come close to making a profit. Most famously, Uber Technologies and Lyft have reported gigantic losses.

Locally, Interswitch went public and overtook Jumia as Africa’s unicorn and number one VC. Like its international contemporaries, after Jumia’s IPO the company reported huge losses and in Q4 last year withdrew from two markets, Cameroon and Tanzania.

With a $1b Q2 profit report last year things aren’t looking good for the company.

Postmates got JPMorgan Chase and Bank of America to help with IPO preparation, and it filed privately with the Securities and Exchange Commission in early 2019. Currently valued at $2.4 billion.

The delivery company has attempted to differentiate itself in the fast-moving delivery space in a number of ways. It teamed up with Square and Bringg to appeal to smaller chains and independent restaurants last May.

The company also added features like Postmates Party that allows customers to share delivery drivers, Postmates Live where customers can order and pickup food at stadiums and concert venues, and a subscription model, Postmates Unlimited. ​Postmates is also leaning into the autonomous delivery model and back in August, it got the go-ahead from San Francisco to test its automated robot, Serve.

Still, despite the high demand and the intense competition, delivery remains a relatively unproven category with uncertain profitability.

The initial public offering market is expected to crank into gear in the next two weeks, with at least two billion-dollar deals on the slate, including a well-known consumer name that may be viewed as a safe bet in a nervous market.

In a filing with the Securities and Exchange Commission, Casper said it will offer 8.4 million shares priced at $17 to $19 each, to raise $159.6 million at the top end of the range. With 39 million shares outstanding expected once the IPO is complete, the company would have a valuation of $741 million, well below the $1.1 billion it garnered in its last private funding round.

“That’s good news,” said Smith. “At least it’s in the ballpark of what market participants think the value should be. It suggests companies are adapting to the reaction of IPO investors to money-losing, highly-valued companies.” Kathleen Smith is the Principal at Renaissance Capital, a provider of institutional research and IPO exchange-traded funds.

Ride-sharing companies Uber UBER, +1.96%  and Lyft LYFT, +1.79%  both saw their IPOs struggle last year as investors pushed back, while office-sharing company WeWork’s deal collapsed entirely after its prospectus revealed shaky underlying financials.

2019 was weak, companies were hit hard by harsh realities and unexpected turns and lesson hopefully were learned.

Hopefully, 2020 will see companies be more patient and strategic about their IPO plans. Unicorn status is great but when the risk of loss outweighs the optimism of profit, waiting may not be a bad way to go. In 2020, we may see fewer IPOs than in 2019 but unicorns may report a better outlook all year round.

The future is bright for the patient and wise.

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