Snowflake’s success highlights a lucrative market for any company going public, so which other soon-to-be public companies should we keep an eye on?
Sept. 21, 2020
Snowflake’s (NYSE: SNOW) IPO has already come to pass and it definitely made its mark with its stock growing 111% on its first day, becoming the largest software IPO ever. In its last funding round before Wednesday’s trading session, Snowflake was valued at $12.4 billion, On its IPO date, the company’s market value hit $71 billion by 1 pm EDT.
The meteoric 1-day rise of this company can be attributed to the endorsement given by both Berkshire Hathaway and Salesforce, both of which bought $250 million worth of stock as the company went public, sending its stock price and popularity soaring. Luckily for Snowflake, it also distracted many investors from the fact that as a cloud data company it has burnt through huge amounts of cash in order to carve out a market share.
Despite the extra helping hand, Snowflake became a public company during a time of stock market madness where IPOs are seeming to fare quite well. After a rather disappointing 2019 and a pandemic which postponed the summer IPO season, things are looking up and there are several interesting companies to keep an eye on.
As part of the hard-hit travel sector, Airbnb did not have a good time during the global lockdown. Its valuation dropped from $31 billion to $18 billion when it agreed to a $1 billion financing loan to help it through the pandemic and then laid off 25% of its workforce a month later.
Other than its misfortune during the ongoing pandemic, Airbnb has been a popular and growing company over the past few years. With many investors familiar with both the company and its platform service, going public might give Airbnb the boost it needs to pay off its pandemic induced debts.
Yet, this accommodation booking company has also begun to recover as a main beneficiary of the popular ‘staycation’ trend. It provides short-term holiday rentals closer to home thus creating the perfect conditions for a socially distanced vacation, rather than staying in an expensive higher-contact hotel. With this ongoing recovery and the current market seeming ripe for IPOs following the trend set by the likes of Lemonade and Snowflake, Airbnb could well be poised to benefit from this active area of the market.
One thing investors should keep in mind is that, much like Lyft and Uber, gig economy stocks need to work extra hard to prove that they are able to overcome the challenge of managing an end product that is largely out of its control. In the end, it will be interesting to see how Airbnb fares on the public market and if it can follow in Snowflake’s impressive footsteps.
Palantir might be the most political company to go public this year. This is a company which trades off chaos and instability, giving governments the tools to manage, analyse, and track public data trends. Palantir will go public via a direct listing on the 23rd September and the share price is currently expected to start at around $10.
This company is not profitable and its combined revenue growth and EBITDA percentage rate calculations are at 14%. For software companies this figure is normally expected to be around 40%, to indicate a good rate of growth. Yet, despite the highly competitive market that it is operating in, Palantir’s gross profit grew 16% by the end of 2019 in comparison to 2018, alongside a 24% revenue growth in the same period.
This data analytics firm is likely to do well, particularly as they were recently chosen by the UK government to oversee a newly managed post-Brexit border. However, investors should be aware that Palantir does not have a great track record when it comes to its involvement with the U.S. Immigration and Customs Enforcement agency, drawing critics from many sides.
Palantir will open up trading with only 1 out of its 3 distinct classes of shares. The Class A common stock will be sold to the public giving 1 shareholder vote per share held. The other 2 classes have different levels of voting rights, whilst the founders will hold a controlling majority of 49.999% between them. Palantir is controlled by strong and experienced leadership, in addition to its growth in profit and revenue, it will be an interesting company to watch over the next few years, likely doing well in a turbulent post-pandemic world.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.