FINANCIAL EDUCATION FOR YOUNG PEOPLE šØāšš©āš
What's an IPO?
IPO stands for Initial Public Offering. It's a process for successful private companies to sell its "shares" or "stocks" to the public (that is you and I). In doing so, private companies go "public" and investors become "shareholders".
A number of stakeholders are involved throughout the IPO process, including;
banks, who underwrite the public offering and structure the terms of the deal
stock exchanges, such as the London Stock Exchange are the conduits through which brokers, institutional investors and the public buy shares.
Shareholders, members of the public who buy IPO issuances become shareholders, which gives them a claim to receive a portion of the future profits (dividends), as well as acquiring voting rights at future Annual General Meetings (AGMs).
Why Does It Matter?
IPOs are useful ways for private companies to raise money and grow their businessšø
Going public can help a business gain credibility by attracting respected investorsš
Notably, ambitious private companies may wish to attract top talent š©āš via IPOs
or indeed, be used strategically to raise awareness of the business and future plansš
In the past, some IPOs paid off handsomely for investors, such as the Facebook IPO in 2011 which increased Mark Zuckerberg's net worth by $20 billion and over 1000 millionaires were created according to Forbes Magazine.
Similarly, LinkedIn's chairman Reid Hoffman's net worth increased to $2 billion thanks to the LinkedIn IPO. There are many other examples.
However, it's important to note, IPOs can also tank and do come with risks. Investors don't always scramble to buy shares, as was the case for the Uber IPO in 2019, which was an omnishambles (more on that another time).
Going further back to 1929 in the US, the infamous Wall Street Crash resulted in a stock market collapse, leading to the Great Depression, when the economy simply stopped functioning.
Two Takeaways
1. IPOs can be an incredible source for wealth creation but also come with significant risks
2. Banks, stock exchanges and retail investors play an important role with the functioning of IPOs
BRITISH 2023 IPO WATCHLISTš
Brewdog - the companyās growth journey so far has been nothing short of impressive, with Ā£320m raised over 15 funding rounds enabling the company to open a chain of craft beer bars and expand to the US and Australian markets. Brewdog has also secured Ā£2.38m worth of grants, achieved 20% scaleup status and been featured on 32 high-growth lists.
The company has been discussing and proactively planning an IPOāhiring law firm Freshfields to help in January 2022āand appears to be waiting for the perfect market conditions. Analysts anticipate an IPO date potentially set this year.
Zopa is a London-based fintech which operates a peer-to-peer lending site. The company was accelerated by Tech Nationās Future Fifty programme in 2013 and has since gone on to raise Ā£516m, across 13 funding rounds.
In October 2021, the company raised a Ā£220m funding round at a reported valuation of Ā£750m, securing its place in the UKās unicorn herd. At the same time, it announced plans to list in London as early as Q4 2022. Zopa is also delaying its IPO until the right time.
Lyst is a fashion technology company and premium shopping app that aims to help users find fashion items from brands. The scaleup company, which is now in its Growth stage of evolution, attended the Future Fifty accelerator in 2013 and has raised a total of Ā£122m of investment from various investors. Techcrunch reported that the time and location of the IPO are still to be confirmed, but that it would likely take place between one and three years after the funding round. In which case, it could be on the cards for 2023.
Cornish Lithium is undertaking an exploration into the potential for lithium mining in Cornwall. Described as āthe new gasolineā by Goldman Sachs, lithium is growing in demand as its usage in batteries and renewable energy storage systems increases. In line with this trend, Cornish Lithium has raised Ā£33.5m over nine equity rounds from Crowdcube and TechMet. It has further received Ā£6.57m across eight grants, with the most recent one coming from Innovate UK in October 2022.
Whilst the company was initially set to IPO in 2022, this was postponed due to tough market conditions. Analysts predict an IPO may well occur this year given the right conditions and a decent valuation.
Onfido develops software designed to verify a customerās identity by assessing the legitimacy of their government ID and facial recognition technology. The digital security company, which draws on artificial intelligence technology, has attended both the Future Fifty accelerator (2017) and the Mayorās International Business Programme (2016).
Rumours have been swirling that Onfido is seeking to list across the pond, after growing quickly in the US. In June 2021, The Telegraph reported that it āhas begun switching from British accounting rules to US standards in preparation for a potential US IPO in the near future.ā Itās most likely that the company is biding their time, waiting for the right moment to float.
AMERICAN 2023 IPO WATCHLISTš
A TikTok IPO is an exciting prospect for many and has been for a while ā the international arm of the social media phenomenon has been rumoured to be pursuing an IPO for new company TikTok Global as early as mid-2020. There are no official dates yet for TikTok Globalās IPO, but itās thought that the company will list in the US and will complete another round of funding before doing so, while still leaving ByteDance a majority stake in the company.
Stripe is a fintech company that develops economic infrastructure to facilitate digital payments and other financial business management processes. In March 2021, Stripe was valued at $95 billion after a $600 million fundraising round. However, the companyās value has since been revised downwards to $74 billion.
In mid-2021, the company was said to be considering a direct listing, and reportedly appointed a legal firm to assist in its listing preparations. Since then, there has been plenty of speculation that the company is ready to go public. The sheer size and scope of this fintech means it is certainly a potential IPO to watch.
Discord is an online platform that seeks to connect users with similar interests, as well as friends and family, into groups and communities. It was valued at $15 billion after raising a $500 million in funding in September 2021. This is a jump of more than double what the company was worth previously, when it was valued at $7.3 billion after its previous funding round. However, itās thought that the companyās valuation will be even higher than $15 billion once it goes public. As of yet, thereās no set date for Discordās IPO listing, but the company is still aiming for some time in 2023.
Reddit is one of the most famous social media platforms, with millions of members around the globe. On September 2021, it was announced that Reddit was hiring IPO advisers, ahead of preparations for its listing. Just three months later, it confidentially submitted a draft registration with the SEC. Despite this, no firm date for the IPO has been announced. Reddit is said to be targeting a valuation of $15 billion; in August 2021, it was valued at $10 billion.
Blockchain.com (which is London based) is rumoured to be planning a US IPO at some point in 2023. In April 2022, it was reported that Blockchain.com had begun interviewing banks ahead of the potential US IPO.
In March 2022, a private funding round valued Blockchain.com at $14 billion. But just six months later ā amid economic instability and growing regulation ā another funding round was said to have slashed the companyās value to just $3 billion. It is not yet known how this shrunken valuation will impact the companyās IPO plans.
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