It's the holy grail for emerging companies. From the day an entrepreneur thinks up an idea for the next big thing, whatever that may be, everyone has their sights set on one goal: hold an initial public offering and "go public."
Reaching an IPO means success in a lot of ways. It's a sign that a company has achieved a certain level of success and is a big vote of confidence from the investing community. Just having people want to own your stock marks an achievement for a business.
Of course, a successful IPO is also a way for entrepreneurs, early investors, and even some employees to achieve liquidity. Once stock can be publicly traded (and any lockup periods have expired), it's possible to cash out.
That's a huge moment, especially for the entrepreneurs, as it's often a wealth-creating moment. It's the time when your net worth goes from theoretical to actual money sitting in the bank.
The lure of the IPO is strong, and it will continue to call for a number of up-and-coming private companies. Here's a look at three that could make the jump in the near future.
The ride to riches
With its latest round of private fundraising valuing the company at around $50 billion, Uber, the taxi-like service experiencing explosive growth, seems like a logical candidate to IPO soon. The New York Times even ran a story in July speculating that a number of top investment banks were making its employees use the service to curry favor so as to get a piece of the action.
"The more the bank can understand the value of a company's product, the more compelling they will be in marketing the deal to investors," Lise Buyer, who advises start-ups looking at IPOs, told the paper.
Uber has been cagey about its plans for any IPO, but the company did sell convertible debt to investors in which the value is tied in part to a future IPO price, The Wall Street Journal reported. The company has also secured a $2 billion line of credit with a group of banks, which the paper described as "a move often made by companies planning to go public."
Here to stay?
Airbnb, the successful travel site that lets people put everything from full homes to a sleeping bag on a couch up for rent, has also long been the subject of IPO rumors. The company, which has an approximate valuation of $24 billion, has been quiet on the subject (as all companies seem to be in the ramp-up period before announcing), but it recently made a move that may tip its hand.
Airbnb has hired Blackstone Group LP Chief Financial Officer Laurence Tosi for the same position. In many cases, a company hires a CFO with experience overseeing financial operations at a public company as a precursor to an IPO. The company was of course appropriately vague in announcing the hiring.
"L.T.'s (Laurence Tosi's) expertise in hospitality and finance is the perfect combination to help take Airbnb to the next level," Airbnb CEO Brian Chesky said in a statement, Reuters reported.
The next social-media star?
With several major social platforms IPO'ing over the past few years, the banking world has looked for the next big social-media site to go public. Next on the list may well be Pinterest, the online scrapbooking site.
The company has a market value of around $11 billion. "That's 31% more than Spotify's valuation and nearly twice as much as Square's valuation, Money Morning wrote in May. "Pinterest is one of the few tech start-ups to hit a $1 billion valuation in less than five years."
Despite all those positive factors, the company's CEO has made comments that suggest an IPO is not imminent.
"We don't have any short-term plans to go public," said CEO Ben Silbermann at a Fortune event earlier this year.
The key words there are "short-term." Silbermann noted that public companies have predictable revenues, and his does not. Once the company can stabilize its revenue picture, it should be ready for its public coming-out party.
Daniel Kline has no position in any stocks mentioned. He worked at a now-defunct tech company during the run-up to its IPO in the late 1990s. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.