The Overshadowed IPO's
By: Dan Heinrich
I'm sure that you all know about Lyft, or "Fryft". And you probably know that the ridesharing technology company Lyft recently had its IPO. And if you've heard of Lyft, you've likely heard about Uber which plans to make its IPO debut this year after wrapping up a 3.1 billion deal in the Middle East. These two names have been dominating the IPO news recently, overshadowing other interesting companies also going public. The companies also interested in going public or that have already formally filed S-1 documents with the SEC include:
- Levi Strauss (S-1 Filed)
- Pinterest (S-1 Filed)
- iHeartRadio
- Slack
- Tradeweb
- Postmates
- Airbnb
It is interesting to learn why these companies have decided to go public, why they have decided to go public at a particular time, and what makes these companies unique. I hope to explain some of these things, as well as touch on some key things to look at in S-1 documents, specifically with Pinterest and Levi Strauss.
The Decision To Go Public
Why are these companies deciding to go public now?
To understand why a company would choose to issue common stock to the public, we can recognize alternitives for raising capital which can vary in cost. Alternatives to issuing stock include forms of financing through issuing bonds, taking on a loan, venture capital and private equity. Based on market conditions (yields, inflation, interest rates) and company profitability, it would make more financial sense to choose a particular financing activity over others. And companies such as iHeartRadio that have been struggling with bancrupcy, or companies such as Pinterest with millions in net losses are seeing IPO's as a valid option.
Why are these companies deciding to go public now?
To understand why a company would choose to issue common stock to the public, we can recognize alternitives for raising capital which can vary in cost. Alternatives to issuing stock include forms of financing through issuing bonds, taking on a loan, venture capital and private equity. Based on market conditions (yields, inflation, interest rates) and company profitability, it would make more financial sense to choose a particular financing activity over others. And companies such as iHeartRadio that have been struggling with bancrupcy, or companies such as Pinterest with millions in net losses are seeing IPO's as a valid option.
S-1 Filings
S-1 documents contain a lot of information. As someone who might buy a share of stock, or is even just considering buying a pair of jeans from Levi's, these documents contain some interesting information.
For potential stockholders:
S-1 documents contain market research, risk assessments, selected financial information, sources of revenue, cost sources, and a summary of operations. For institutional investors, S-1 documents contain innformation on share class structures. For example, Pinterest intends to issue Class A and Class B stock to shareholders. This approach in modern IPO activity is controversial as it gives larger investors significantly more voting rights...like 20:1 per share of B to A stock.
For potential customers:
Described in S-1 documents are the companys' values, commitment to consumers, company culture, and history. S-1 documents touch on brand image and expand on growth, which combined will make buying a pair of jeans a valuable investment that will stay in-style.
I'm definitely not an expert on this, so if anyone else has a perspective on the ipo's I'd enjoy hearing them
S-1 documents contain a lot of information. As someone who might buy a share of stock, or is even just considering buying a pair of jeans from Levi's, these documents contain some interesting information.
For potential stockholders:
S-1 documents contain market research, risk assessments, selected financial information, sources of revenue, cost sources, and a summary of operations. For institutional investors, S-1 documents contain innformation on share class structures. For example, Pinterest intends to issue Class A and Class B stock to shareholders. This approach in modern IPO activity is controversial as it gives larger investors significantly more voting rights...like 20:1 per share of B to A stock.
For potential customers:
Described in S-1 documents are the companys' values, commitment to consumers, company culture, and history. S-1 documents touch on brand image and expand on growth, which combined will make buying a pair of jeans a valuable investment that will stay in-style.
I'm definitely not an expert on this, so if anyone else has a perspective on the ipo's I'd enjoy hearing them
Hey Dan,
ReplyDeleteLyft actually broke a record for short sales today. The company is highly levered and partly wanted to IPO to beat Uber to the punch, and long time investors needed an exit. The company I worked for is doing some of those deals you mentioned and there is definitely going to be a lot of benefits to investors investing in them, but Lyft & Uber growth is almost limitless so its hard to discount them so early.
-Khalil
I am also following these companies and I am excited to see how all these IPO's will look like, which one do you think will be the most successful?
ReplyDeletePersonally I think that Levi's is going to be the most successful. They have proven to be a sustainable company with consistent income and revenue growth. They also have clear plans for the future unlike most of the other companies. They have a conservative valuation too, which makes them stand out from other companies like the psuedo meat company IPO that had an article in the WSJ yesterday.
DeleteDaniel,
ReplyDeleteThanks for sharing. Exciting times ahead for various industry verticals. Once the much-awaited Uber IPO goes through, it will be very exciting to see how both ride-sharing giants are able to sustain their current pricing strategies for app users.
best,
Angad Singh
Daniel,
ReplyDeleteThanks for sharing. We were actually learning about Lyft's IPO in one of my classes and all their forcasts for share prices despite their continued annual losses. Interesting stuff, thanks for the good read!
Davis