2019 has been a banner year for IPOs.
Or rather it has been a banner year for the valuations of companies that have hit the public market for the first time. The five largest offerings of the year alone brought well over $100 billion to the stock market...but that value hasn't exactly stuck around.
In this video from our YouTube channel, we break down why some of the biggest initial public offerings of 2019 are struggling and how one company in particular has managed to soar.
Narrator: Hi and welcome to The Motley Fool's Bottom Line series. In this video, we're taking a look at some of 2019's most notable billion-dollar IPOs to see how they're performing since they've gone public.
There have been a lot of companies with valuations above $1 billion that have gone public in 2019. Here's a list of some of the largest and most well-known ones:
- Uber (NYSE:UBER): $75.5 billion
- Lyft (NASDAQ:LYFT): $20.6 billion
- Pinterest (NYSE:PINS): $10 billion
- SmileDirectClub (NASDAQ:SDC): $8.9 billion
- Chewy (NYSE:CHWY): $8.8 billion
- Peloton (NASDAQ:PTON): $8.1 billion
- Avantor (NYSE:AVTR): $7.5 billion
- Tradeweb (NASDAQ:TW): $6 billion
- Beyond Meat (NASDAQ:BYND): $1.5 billion
IPOs often get a lot of attention because they offer new opportunities to invest in fast-growing companies with promising potential.
But just because a company gets a lot of attention leading up to its IPO doesn't mean that its stock will perform well after the company goes public.
For examples of how quickly a billion-dollar IPO can fizzle, look no further than Uber, Lyft, and Peloton.
Uber was the largest and one of the most anticipated IPOs of 2019.
The ridesharing company's stock climbed more than 11% in the first seven weeks after going public. But those initial share price gains have faded.
Uber's stock price is down 24% since its IPO, amid rising concerns that the company is spending too much money and not growing revenue fast enough.
Uber's losses continue to widen, leaving investors worried that the company's former meteoric growth and dominance in the ridesharing market, won't be enough to make the company profitable.
Uber laid off 400 employees and announced a hiring freeze just two months after going public, which is a bad sign for a company that's supposed to be in growth mode.
The company is also dealing with an increasingly strict regulatory environment for its drivers, which work as independent contractors for the company.
With the ridesharing giant facing hurdles on multiple fronts, it's no wonder why Uber has fallen out of favor with investors lately.
Of course, it's hard to talk about Uber's IPO, without talking about its ridesharing competitor, Lyft, as well.
Lyft went public at a valuation of about $24 billion in March 2019 and has had a rocky performance ever since.
To date, Lyft's share price has tumbled more than 40%.
Lyft is unprofitable right now and lost $463 million in the third quarter of this year. It's also facing similar hurdles to Uber.
As California moves closer to reclassifying independent contractors as employees, Lyft could face increasing costs related to its drivers.
And if other states follow California's lead, it could eventually put Lyft's, and Uber's, underlying businesses, in jeopardy.
Of course, not all of the IPO flops of 2019 happened in the ridesharing market.
Peloton, which sells expensive, tech-heavy workout equipment — as well as monthly workout subscriptions — has seen its stock slide 11% since its IPO.
The company has done a good job of growing and retaining users and has about 1.4 million accounts right now, a half a million connected subscribers, and a 95% customer retention rate.
But some investors are understandably concerned consumer interest in buying luxury workout equipment — in addition to a monthly subscription fee — could decline rapidly if and when a recession comes.
Despite the fact that many of the biggest billion-dollar IPOs of 2019 have fizzled out, there have been some winners.
For example, Beyond Meat, the plant-based meat company, went public back in May and since then, its stock has been on a wild ride, rising more than 240% over the summer. Beyond Meat's share price has fallen since then, but it's still up more than 25% since the company's IPO.
And in the third quarter of 2019, Beyond Meat's sales jumped 250% and the company reported its first-ever profit — which is far more than many of 2019's IPOs can claim.
The bottom line is that IPOs can be exciting events for companies, but investors should know that just because there's a lot of hype around a company going public, it doesn't necessarily mean that the company's stock is going to perform well right out of the gate — or over the long term.