It's been a slow year for companies going public through initial public offerings (IPOs). Given the decline in equity markets, high inflation, and geopolitical uncertainty, many private companies have decided to forgo public debuts in 2022.
Companies want the timing to be right to get the most out of going public. Several highly valued companies hope 2023 presents a more favorable backdrop for going public. Some major IPOs, including Stripe, Epic Games, and Reddit could be on the horizon next year. Combined, these companies are valued at more than $100 billion. Here's what you need to know.
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This payment processer could be one of the largest IPOs on record
Stripe offers online payment processing and a credit card payment gateway, simplifying the checkout process for businesses. Its software-as-a-service (SaaS) makes it simple and efficient for online sellers to complete transactions. It also protects its clients by flagging fraudulent payments and blocking suspicious transactions.
The company's platform enables businesses to collect payments and move money seamlessly across borders. Some of Stripe's most prominent customers include Amazon, Alphabet, Shopify, Lyft, and Twilio. Over 50 companies process $1 billion or more through its network, and in 2021, the company processed $640 billion in payments. To put this into perspective, PayPal processed $1.25 trillion in transactions in 2021.
Founded in 2009, Stripe has backing from Elon Musk, Peter Thiel, and venture capital firm Sequoia Capital. During its most recent fundraising round in 2021, Stripe earned an enormous valuation of $95 billion. In July, its valuation was estimated to be around $74 billion, which could make it one of the largest IPOs on record if it does go public in 2023.
Fortnite creator Epic Games could have an epic IPO
Epic Games creates video games and is best known for its Fortnite gaming franchise, which touts more than 350 million players worldwide. While Fortnite is free to play, Epic Games makes money through V-bucks that gamers can use to buy customized gear and unlock additional features to the game. A 2018 study found that 70% of Fortnite users purchase digital items, and in 2019, the series grossed $1.8 billion for the game creator.
Epic Games has been the subject of regulatory scrutiny and recently agreed to pay a total of $520 million for violating children's privacy laws and using misleading gaming features to trick customers into spending money. It agreed to pay $275 million to the Federal Trade Commission and must adopt privacy settings for kids and teens as part of that agreement. It was also required to pay customers $245 million in refunds for its misleading gaming practices.
In April, it raised $2 billion from investors to fulfill its vision for the metaverse, giving it a private valuation of about $29.5 billion. While it has had no problem raising money privately, speculation that Epic Games would go public has been around since 2021. Improving market conditions could spur it on to finally take the leap next year.
This social media giant could do an IPO after waiting on the sidelines
Reddit operates a social media platform and is self-described as "the front page of the internet." More than 130,000 forums and communities, also known as subreddits, make up the website. These communities cover every topic imaginable, including investing, news, video games, sports, and the infamous Wall Street Bets.
According to the internet marketing company Fannit, Reddit is the 13th most popular social media website in the world, with an estimated 430 million monthly active users. Estimates show that the company raked in $430 million in ad revenue last year.
During Reddit's most recent funding round in August 2021, Fidelity's $410 million investment gave the company a valuation of $10 billion. Reddit confidentially filed a draft with the Securities and Exchange Commission to begin the IPO process in December last year.
However, like other social media companies, Reddit heavily relies on ad revenue and likely saw a pullback in spending, resulting in a delayed IPO listing. A better market environment could encourage this social media giant to be another one of next-year's most anticipated IPOs.
