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24 May 2019

A bumpy ride for tech IPOs

It’s been a rocky road for cab-booking firms Uber and Lyft’s stock market debuts, but it’s still been a busy time for global initial public offerings (IPOs).

Against a backdrop of Wall Street turbulence around the US-China trade tensions, Uber stalled at its New York Stock Exchange debut earlier this month, with shares closing down almost 8% from the US$45 IPO price. By the end of the day, Uber was valued at US$69.7bn, far below the US$120bn figure that bankers had put forward last year.

It followed a disappointing debut for competitor Lyft, which made its stock market debut in March and had seen volatile trading since.

Despite 2019 being named “the year of the tech IPO”, the disappointing performances led to the question: Has investor appetite for these tech companies been overestimated?

Pinterest, the site where users can ‘pin’ ideas and images to an online ‘corkboard’, saw its shares rise 30% in the few weeks following its April IPO, before falling after a disappointing first-quarter report. However, shares in Zoom Video Communications, a conferencing company that also made its NASDAQ debut in April, rose from their IPO price of US$36 to peak at just below US$90 towards the end of last week, although they have fluctuated since then. Unlike the two cab-hailing companies, Zoom has been profitable. According to its full-year results, the company doubled revenue year-on-year from 2018, providing investors with greater reassurance than they might have for Uber and Lyft, which have both made major losses over the past year.

However, it’s not just about profit. Beyond Meat, the plant-based ‘meat’ company created by vegan Ethan Browne, is also loss-making. In its financial results for 2018, the company said it made losses of almost US$30m and in its flotation document, said: “We may be unable to achieve or sustain profitability.” Yet after listing on NASDAQ at the beginning of May at US$25 a share, the share price peaked at US$92.92 on 16th May 2019, and at the time of writing (22nd May 2019) was just over US$77 a share. As more people begin to embrace a plant-based diet, Beyond Meat, which includes actor Leonardo DiCaprio among its investors, is becoming a leader in the vegan ‘meat’ market thanks to products such as its Beyond Burger.

In London, the jitters that impacted Uber’s IPO were felt by United Arab Emirates-based payments group Finablr when it made its Stock Exchange debut. Shares were priced at 175p each, below an expected range of 210p – 260p. It arrived in a turbulent week for global markets as trade tensions between the US and China rose, and investors chose to exercise caution.

However, UAE payment group Network International raised US$1.6bn in its IPO in April, making it the world’s biggest tech IPO since Worldpay in 2015.

Transport tech IPOs seem to be in fashion this year as rail-booking app Trainline has announced its intention to float on the London Stock Exchange. The company plans to increase its profile and take advantage of increasing demand for online ticketing services. The company is said to be aiming for a valuation of £1.5bn.

In the luxury arena, Watches of Switzerland has announced it plans to seek a market capitalisation of up to £660m when it floats on the London Stock Exchange in June. The company said it would sell shares in a range between 250p and 277p, and would aim to raise £155m to cut debt and support its growth strategy.

Finally, there was excitement earlier this month as Walmart announced it was seriously considering listing Asda on the London Stock Exchange. According to reports, the head of Walmart’s international division, Judith McKenna, told a meeting of managers that an IPO was potentially on the cards in order to strengthen the supermarket’s long-term success. It came after the Competition and Markets Authority blocked an attempted takeover by J Sainsbury in April. However, Ms McKenna stressed that the process was not being rushed, so it looks as if anyone waiting to own shares in the supermarket giant will have a few years to wait yet.

If you are not already registered for updates you can register with our email alert service at www.redmayne.co.uk/IPOs and we will endeavour to keep you informed of any New Issue and IPO investment opportunities that are available to retail clients through Redmayne Bentley.

Please note, investments and income arising from them can fall in value and you may lose some or all of the amount you have invested. There is an extra risk of losing money when shares are bought in some smaller companies, including penny shares, as there can be a big difference between the buying and selling price.
Past performance and forecasts are not reliable indicators of future results or performance. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned.
 
A bumpy ride for tech IPOs

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