Why The 2019 Tech IPO Bonanza Is Different
With Uber ready to debut as the third largest tech IPO in the US, 2019 is shaping up as a breakout year for tech as funds unload into the public markets with a significant number of IPOs. The last time this kind of a bonanza occurred, Wall Street was partying like it was 1999, because it was.
This time around, the 2019 IPO vintage is very different, and as large unicorns like Uber are coming to market, it is crucial to understand the key characteristics that make this situation unique.
While Uber is set to make waves, we shouldn’t expect another Amazon. Amazon went public at a market cap of $400 million. Facebook went public at $104 billion. Lyft’s IPO was at $22 billion and Uber is a $82 billion valuation, well below the $100 billion target, and initial opening came well below the $45 IPO price.
Companies in 1999 were going public a lot earlier, which would allow for IPO investors to have potentially significant upsides. At the same time, most of the companies were not ready for public markets and capitalized on the hype of the Dot Com boom.
Venture funds were a lot smaller and mega funds were not around to keep companies private for as long as they are now.
Unicorns were a rare breed. As of 2019, unicorns represented only 2% of deal flow and a whopping 33% of total assets invested.
This time around, most of the value was created pre-IPO as the companies coming to market are a lot more mature, and in most cases, overvalued.
While Lyft’s stock is down by nearly 28% from its IPO price, Uber is on target to become the third largest US Tech IPO and will set the tone for the remainder of the unicorns anxiously waiting on the sidelines. By the look of initial Uber opening price, future overpriced Unicorns will have a hard time with this demanding public markets.