Some of the most exciting ideas were born in garages, sheds, basements – places where young and enthusiastic entrepreneurs dared to dream big and turn their dream into reality (and had the chance to work undisturbed). And many of these dreams turned into massive businesses that are shaping our lives today. Think Apple, Google, Microsoft, and the list could go on and on. These companies went through their share of ups and downs, gathering experience and funding as they grew. And all of them reached a point where they needed a massive infusion of capital – and went public. Going public is an important point in a business’s “life”, so to speak – it strengthens the company’s capital base, it diversifies its ownership and increases its prestige but it takes part of the control over its activity out of the hands of the owners, forces them to disclose more of their activity to the public, and it attracts more regulatory oversight.
When a company goes public, it is expected for its shares to rise almost instantly, especially if they are companies active in a “trending” area, like technology, biotechnology, and such. This year, quite a few well-sounding names entered the trading floors of stock exchanges around the world and posted spectacular growth immediately after they became available. Among them, the “fake meat” startup Beyond Meat that grew fivefold in a short time or Zoom Video, a web conferencing and video communication service provider that saw its market value grow by 140% after going public.
There are times, in turn, when going public doesn’t go exactly as planned. This year, where were two companies whose IPOs were eagerly anticipated by the investors all over the world, both of them ride-hailing services: Uber and Lyft. Uber’s IPO was the biggest since Facebook went public in 2012, and the largest since Chinese retail giant Alibaba went public in 2014. Although its shares were expected to sell like hotcakes, its performance was disappointing: its shares dipped by 8% on the first day of their trading. Uber’s rival, Lyft fared even worse initially – it was down 12% pretty quickly, disappointing investors and analysts alike.
The disappointing IPOs of Lyft and Uber are, in turn, the exceptions. Analysts expect the total sum raised by IPOs this year to reach (perhaps even exceed) the record-breaking amount of the year 2000 before the “dot-com” bubble popped. Investors love them – and what’s not to like? There were 62 IPOs in the second quarter of the year alone, raising $25 billion of capital, and generating average returns of 30%, which is great. And this tendency is expected to continue for the rest of the year – perhaps even the next.