Sally White takes a look at what IPOs are likely in this highly competitive environment and other disruptive forces at play in 2017
The rumour mill has gone into overdrive. The sight of record levels of money flowing into travel tech investment so far this year has got markets wild for IPOs. Unlike the long run of private funding, IPOs would let us all in on the success at the likes of Uber, Airbnb et al. So far these new travel giants have opted against stock market quotes, unlike their tech peers in other sectors such as Twilio and Nutranix.
Private travel tech start-ups pulled in $1.4bn of funding in the first quarter of 2017. The largest share went to early-stage funding rounds. Most went to companies in the US, followed by India and China. At the moment CB Insights Innovation is forecasting an increase in overall funding to travel tech companies that will beat 2016’s records. IPO’s, by contrast, have been in short supply for months and even years as their founders could get money without the hassle of stock market listings.
All very tantalising! Especially as these travel stars’ successes are always in the news – Airbnb has raised a total of $4.4bn privately, way ahead of anyone else even in Asia. Germany’s GoEuro has pulled in$146m. Sooner or later, however, the major funds which have been able to buy private stakes in the star tech companies will want to take some profits, and force IPOs as result.
An IPO for Uber could be massive for both the company and Wall Street. It’s currently valued at $68bn after a total of nine rounds of funding worth $12.9bn since its launch. And thanks to Uber’s structure—a unique combination of transportation company, mobile internet company, and real world engineering—the company has been touted as one of the best future IPOs, says broker Zacks Wall Street report.
Airbnb’s last valuation clocked in at $31bn—it’s worth only about $9bn less than Marriott—thanks to its latest billion-dollar round of equity funding, making it the second most valuable US start-up behind Uber. This, as well as being a recognised name in the hotel industry and the sharing economy, is helping create a buzz, Zacks notes.
“However, this new round of funding, in addition to a separate deal where investors are planning to buy $200m in stock from Airbnb employees, could be seen as a move to relieve some of the pressure of filing for an IPO. Airbnb is adding significantly to its amount of available cash, allowing it to spend enough and continue its global expansion without going public,” the broker adds.
Airbnb is also reportedly watching fellow tech unicorn Spotify to see which IPO route the music streaming giant will take. According to The Wall Street Journal, Airbnb may want to mimic Spotify’s unconventional initial public offering.
Investors’ enthusiasm is not blind, and comment on Wall Street is that Airbnb needs to keep an eye on the increasing competition
Airbnb is being given a tentative valuation of $31bn – pretty impressive. Though, investors’ enthusiasm is not blind, and comment on Wall Street is that Airbnb needs to keep an eye on the increasing competition. Companies like Roomorama, Expedia’s HomeAway, and TripAdvisor’s Housetrip, all have a dedicated following of their own, and are beginning to eat into Airbnb’s market share.
Yet, as the analysts are saying, despite rival companies and regulatory issues, Airbnb has the potential to be one of the hottest upcoming IPOs.
For Uber, too, there are cautious comments. Companies like Lyft, Southeast Asia-based Grab, India’s Ola, and especially China’s Didi Chuxing have all started to eat into its market. Didi, say analysts at Zacks, is arguably Uber’s biggest threat overseas. (It conceded defeat last August, selling its UberChina operations to Didi.) Even Alphabet, Google’s parent company, is becoming a threat to Uber, with plans to make its self-driving cars unit a stand-alone business and maybe an IPO.
Despite the many controversies buzzing around Uber, investors, says Zacks “are eagerly awaiting an Uber IPO. Many have believed, or hoped, the company would go public for a few years.” However, founder Travis Kalanick wants “to make sure [an IPO] happens as late as possible,” according to an interview he gave to CNBC last year.
Meanwhile, Wall Street is also eyeing some new disruptors to try to keep ahead in the investment game. There is Zee.Aero, a small, all-electric plane that can take off and land vertically funded by Google co-founder Larry Page. And there is Hyperloop, next-gen transit using vacuum tubes, which will run between Dubai and Abu Dhabi, far has been funded in the Middle East. Or Nexar which uses smartphones to create an AI-backed dashcam network to predict and prevent accidents – it reads road conditions in real-time, and can streamline insurance claims processes using 3D re-creation.
These may sound weird, but not so long ago so did Uber, Airbnb, et all………