The New Year holds the potential to be an even more exciting one for the IPO market, with a particular focus on US tech companies. 2014 has seen $85 billion raised in offerings, an outstanding increase over 2013’s $54.9 billion. Such a trend is believed to continue and improve in 2015. There are numerous tech firms, valued at billions of dollars, which are expected to make their way to the Wall Street very soon. The list includes 40 candidates with a valuation exceeding $1 billion and comprises major Silicon Valley start-ups such as the photo-messaging app Snapchat (valued at $10 billion), the lodge-rental website Airbnb (valued at $13 billion), and the visual discovery web and mobile app Pinterest (valued at $5 billion). Given the combined worth of such companies, which are still deemed to be at an early growth stage, the next twelve months are likely to be historic for the IPO scene, with unprecedented potential highs within the markets.
There is however, one player which stands out from the rest of the start up crowd – the taxi and ride-sharing app UBER, which, in 2010, was the first to introduce the smartphone application offering one click rides. There are rumours and hype of UBER being the Alibaba of 2015, for the following reasons:
- Astonishingly fast development: in less than five years UBER evolved in a truly global business, which, starting from San Francisco, expanded its operations to 250 cities in 50 countries worldwide
- Remarkable funding: CrunchBase reports that, since its establishment, the start-up received a total funding of $3.8 billion from 38 investors, the most recent of which was the Chinese web-services company Baidu, which backed UBER with $600 million
- Dramatically increasing value: in the last funding round (December 2014), the company was valued at $40 billion, up from the previous valuation of $17 billion made in June 2014 and exceeding the value of well-established companies such as Twitter, Hertz, Kraft Foods and Delta Airlines
- Promising growth forecasts: according to CEO Travis Kalanick the company, which grew six-fold in 2014, is expected to double its size in 2015, with a percentage increase in revenue of nearly 600% since 2013
The aforementioned numbers are rendered even more impressive by the two facts. Firstly, although UBER operates globally, it generates most of its revenues from a few US cities such as San Francisco and New York City. Secondly, even though it has specialised in taxi-hailing services, UBER started a delivery business, with plans to extend its operations to truck, lorry and cargo transport. Therefore, considering that the company is being able to reap $10 billion of gross annual revenue (equating $2 billion of net annual revenue) from only a handful of cities, it is easy to see how big the company will be and how high its revenue and valuation might become when (and if) UBER:
- Will fully develop its presence in the other 100+ cities in which it is already running as taxi booking platform
- Will widen its operations to other sub-fields of the transport sector
It is hard to say when UBER will decide to float. Nevertheless, there is no doubt that the company’s listing would represent a remarkable deal. Elite investors supporting the company believe it will hold an IPO before 2016, at a valuation estimated between $50 and $100 billion. The ‘big names’ that already hold or will soon acquire a stake in the company include the venture capital firm Google Ventures, the investment bank Goldman Sachs, the hedge funds Glade Brook Capital Partners and Valiant Capital Partners, the wealth and mutual funds Qatar Investment Authority and Fidelity Worldwide Investments, and the telecom giant America Movíl (owned by the Mexican billionaire Carlos Slim Helu). The presence of so many ‘aggressive’ investors, combined with sky-high valuation and performance, will put strong pressure on UBER to go public. In the same way it is revolutionising the traditional taxi and transport industry around the world, UBER, along with its fellow US start up companies appear to be more than ready to shape the stock market in 2015, which could, should they wish to do so, be the biggest year ever for tech IPOs.