IP[N]O: A Tough 2019 for Public Offerings

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Initial Public Offerings are arguably one of the most exciting times for both investors and the firm itself. The step of bringing a company public is an incredible milestone, allowing businesses to access what is likely the largest pool of capital available to grow and expand. The year 2019 had no shortage of IPO drama, with several tech unicorns––a unicorn being a privately held company worth at least $1 billion––and a fellow Canadian company having its go at what would have been the largest Canadian offering since Manulife Financial in 1999.

Two of the highest profile offerings include ride-hailing firms such as Uber and Lyft, both of which have left a sour taste in the mouth of early investors. Uber debuted back in May at a price of $41, hit a high of $46 in June, and sits today at $30.99. Lyft has fared much worse, not hitting any prices higher than their initial offering price of $78, currently sitting at $43.58. Interestingly, both of these companies set records for the most money loss from operations running up to the IPO. Neither has become profitable as of yet, which has caused many to question why these companies have decided to go public so soon.

Arguably a more dramatic ordeal is the WeWork debacle and its now infamous former CEO and founder, Adam Neuman. The We Company, which provides office space for entrepreneurs to come together, completely scrapped its plans to go public back in October, after its disclosures caused the firm’s valuation to drop from around $47 billion to a mere $10 billion. Among many reasons for skepticism about the company, such as unproven demand for the service, Neuman’s seemingly unethical behaviour scared many investors away, causing primary shareholder Softbank to force Neuman out. It was found that the former CEO had trademarked the word “We” and was charging his own company to use it, and also buying-up properties that WeWork planned to buy beforehand, only to lease the property back to WeWork. While such despicable behavior caused the founder to be removed from his own firm, he landed on a rather comfortable $1.7 billion payout package.

Canada also faced the prospect of an enormous offering with GFL Environmental, which is the company responsible for providing Canadians with garbage disposal with its fleet of bright green trucks. GFL sought to raise around $2.1 billion by selling some 87 million shares priced between $20-$24. However, after the underwriting banks could only garner support at $18 per share, which would value the entire company at $5.7 billion, shareholders scrapped the plan to go public, believing it undervalued the company. The firm has indicated that it will reconsider at a future date when market conditions have changed.

Some honourable mentions include Beyond Meat and the beyond massive Saudi Aramco offering. Beyond Meat had a wild ride, launching at $65, soaring to a high of $234.9, but has since fallen to $75.64. While the Aramco offering was initially thought to be available to anyone, it appears now to be only available to citizens of Saudi Arabia; even still, the offering pegs the presently state-owned company at trillions of dollars. 

Although 2019 certainly had many eye-catching IPO headlines, these famous companies really did not have all that much to offer investors.

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Brandon Orr

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By Brandon Orr

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