7 ms·

Why all the recent IPOs?

by OedipusRex 7y ago

danaos 7y ago
Airbnb was founded in 2008. My take is investors want to cash out before the upcoming recession.
- enos_feedler 7y ago
  Recession?
  - Tushon 7y ago
    There are a non-trivial number of signs of a recession coming up this winter/2020. E.g. https://www.cnbc.com/2019/09/02/heres-a-list-of-recession-signals-that-are-flashing-red.html https://www.cnbc.com/2019/09/02/heres-a-list-of-recession-si...
    - asveikau 7y ago
      Predicting the exact timing of a recession is very hard to do. You can say there are troubling signs but I would be extremely skeptical of somebody telling me "Winter/2020" with a high degree of confidence. Meanwhile, there have been people pointing out troubling signs for several years now, and if you acted on their advice you'd have lost money, but nobody could have told you that for sure at the time, either.
    - gruez 7y ago
      If everyone thinks there's going to be a recession, wouldn't that mean that would be priced into the IPO price? ie. if you think that there's going to be a recession in 3 months, you wouldn't plow a boatload of money into an IPO.
      - ummonk 7y ago
        High information investors and executives know an impending recession is probable, but low information investors will still happily plow money into IPOs.
    - scarejunba 7y ago
      The current SPY Puts for 240 expiring Dec 2021 are $12.30. How many did you buy?
Tiktaalik 7y ago
Get out while the going is good.
hkarthik 7y ago
Late stage funding options are drying up big time. See Uber, Lyft, WeWork, and Softbank. These companies are still burning cash at high rates, so going to the public markets is the only option to raise that much capital.
- mrgordon 7y ago
  This will most likely be a direct listing because Airbnb doesn't need to raise more capital. Its actually about employee liquidity for people waiting 10+ years.
  - irq11 7y ago
    You keep saying this, but you can’t possibly know it unless you have inside knowledge. So either state your source or just say that you’re guessing.
    - mrgordon 7y ago
      One day later here is a huge NYTimes piece about how the employees were pushing hard for the public offering for years and it caused tensions: https://www.nytimes.com/2019/09/20/technology/airbnb-employees-ipo-payouts.html https://www.nytimes.com/2019/09/20/technology/airbnb-employe...
    - nemothekid 7y ago
      The source is Airbnb themselves saying they have been EBITDA profitable for 2 years now - which is a very strong and verifiable claim for once they do go public. https://techcrunch.com/2019/01/15/ahead-of-ipo-airbnb-achieves-profitability-for-second-year-in-a-row/ https://techcrunch.com/2019/01/15/ahead-of-ipo-airbnb-achiev...
      - random42 7y ago
        I believe the parent comment was regarding "Its actually about employee liquidity.. " part.
mrgordon 7y ago
Nobody said this was an IPO. Most likely a direct listing since Airbnb doesn't need to raise capital.
- jwegan 7y ago
  A direct listing is definitely not the most likely option. Only two major tech companies have done direct listings and there are also a lot more reasons you would want to do an IPO instead of a direct listing 1) Neither SPOT or WORK has done great, especially WORK 2) IPO allows you to choose your investors. This gives you the opportunity to choose major institutional investors that are in for the long term which will help reduce stock volatility. 3) Even if you don't need money, raising billions can open up a lot of opportunities for the business and give you a warchest to derisk potential market downturns.
  - mrgordon 7y ago
    A direct listing is definitely the most likely option which is why they didn’t call it an IPO anywhere. They already have huge numbers of institutional and strategic investors. I’m not sure who you think they are waiting to get investment from. Crunchbase lists 53 investors including YC, Sequoia, Andreesen Horowitz, Greylock, Founder’s Fund, CapitalG, and TCV. They turned down SoftBank funding. Their shares have been owned by mutual funds from Vanguard, Fidelity, Morgan Stanley, Principal, T. Rowe Price, and Hartford for at least five years. They’ve already raised the warchest that you’re talking about. Spotify and Slack had fine initial listings, but they are both losing tons of money so the market reacted negatively as their quarterly earnings made this more and more clear. Not a great comparison to a company that has been printing money and hasn’t raised a serious round in years.
  - mrgordon 7y ago
    Here is an article from Reuters today that emphasizes that most people expect a direct listing: https://www.reuters.com/article/us-airbnb-ipo/airbnb-plans-public-listing-in-2020-idUSKBN1W41Z7 https://www.reuters.com/article/us-airbnb-ipo/airbnb-plans-p... “In a short statement posted on its website on Thursday, Airbnb did not give any details on how it plans to list its shares, although it is widely expected to take a direct-listing route.”
mbesto 7y ago
1) Impending recession 2) Not enough IPOs so lots of investor interest to deploy capital into something( (thus driving up the price, making it more attractive for startups) 3) We're near the end of a 7~10 year cycle where lots of private VC capital was deployed and needs to be returned 4) 500 private investor maximum SEC rule
- theflyinghorse 7y ago
  Could you elaborate a bit on the cycle part. Why is it a cycle at all assuming money gets invested all the time instead of once-a-x-years?
  - jimbob45 7y ago
    Not that dude but ~11 years ago was the recession so I'm guessing he's alluding to the fact that lots of investment money comes out of hibernation all at once when recessions begin to recede.
  - pmart123 7y ago
    The best place to learn about this is to check out the memos Howard Marks has written over the years.
  - mbesto 7y ago
    When a VC raises a fund, they usually try to return the money in 7~10 years after they start deploying the capital to startups. In other words, they want to exit their position no later than 10 years and usually shoot for 5~7.
  - mdorazio 7y ago
    Simplifying a lot, but... VC companies themselves raise money from investors to create a fund, which is then used to invest in startups. Generally, funds are raised with a specific timeline pitch for returns to the investors - often 7-10 years. In order to return money to investors, the investments in the fund have to actually pay money back to the VC firm - the best way to do this is via IPO (although acquisition is also an option). Due to overall market conditions, a glut of investment happened in the VC space 7-8 years ago (i.e. a bunch of funds were started), and those funds now need to get money back to the investors to prove a nice ROI, so there's a push to get the startups that were funded by the fund to exit one way or another.

Why all the recent IPOs?

danaos 7y ago

Airbnb was founded in 2008. My take is investors want to cash out before the upcoming recession.

enos_feedler 7y ago
Recession?
- Tushon 7y ago
  There are a non-trivial number of signs of a recession coming up this winter/2020. E.g. https://www.cnbc.com/2019/09/02/heres-a-list-of-recession-signals-that-are-flashing-red.html https://www.cnbc.com/2019/09/02/heres-a-list-of-recession-si...
  - asveikau 7y ago
    Predicting the exact timing of a recession is very hard to do. You can say there are troubling signs but I would be extremely skeptical of somebody telling me "Winter/2020" with a high degree of confidence. Meanwhile, there have been people pointing out troubling signs for several years now, and if you acted on their advice you'd have lost money, but nobody could have told you that for sure at the time, either.
  - gruez 7y ago
    If everyone thinks there's going to be a recession, wouldn't that mean that would be priced into the IPO price? ie. if you think that there's going to be a recession in 3 months, you wouldn't plow a boatload of money into an IPO.
    - ummonk 7y ago
      High information investors and executives know an impending recession is probable, but low information investors will still happily plow money into IPOs.
  - scarejunba 7y ago
    The current SPY Puts for 240 expiring Dec 2021 are $12.30. How many did you buy?

Tiktaalik 7y ago

Get out while the going is good.

hkarthik 7y ago

Late stage funding options are drying up big time. See Uber, Lyft, WeWork, and Softbank. These companies are still burning cash at high rates, so going to the public markets is the only option to raise that much capital.

mrgordon 7y ago
This will most likely be a direct listing because Airbnb doesn't need to raise more capital. Its actually about employee liquidity for people waiting 10+ years.
- irq11 7y ago
  You keep saying this, but you can’t possibly know it unless you have inside knowledge. So either state your source or just say that you’re guessing.
  - mrgordon 7y ago
    One day later here is a huge NYTimes piece about how the employees were pushing hard for the public offering for years and it caused tensions: https://www.nytimes.com/2019/09/20/technology/airbnb-employees-ipo-payouts.html https://www.nytimes.com/2019/09/20/technology/airbnb-employe...
  - nemothekid 7y ago
    The source is Airbnb themselves saying they have been EBITDA profitable for 2 years now - which is a very strong and verifiable claim for once they do go public. https://techcrunch.com/2019/01/15/ahead-of-ipo-airbnb-achieves-profitability-for-second-year-in-a-row/ https://techcrunch.com/2019/01/15/ahead-of-ipo-airbnb-achiev...
    - random42 7y ago
      I believe the parent comment was regarding "Its actually about employee liquidity.. " part.

mrgordon 7y ago

Nobody said this was an IPO. Most likely a direct listing since Airbnb doesn't need to raise capital.

jwegan 7y ago
A direct listing is definitely not the most likely option. Only two major tech companies have done direct listings and there are also a lot more reasons you would want to do an IPO instead of a direct listing 1) Neither SPOT or WORK has done great, especially WORK 2) IPO allows you to choose your investors. This gives you the opportunity to choose major institutional investors that are in for the long term which will help reduce stock volatility. 3) Even if you don't need money, raising billions can open up a lot of opportunities for the business and give you a warchest to derisk potential market downturns.
- mrgordon 7y ago
  A direct listing is definitely the most likely option which is why they didn’t call it an IPO anywhere. They already have huge numbers of institutional and strategic investors. I’m not sure who you think they are waiting to get investment from. Crunchbase lists 53 investors including YC, Sequoia, Andreesen Horowitz, Greylock, Founder’s Fund, CapitalG, and TCV. They turned down SoftBank funding. Their shares have been owned by mutual funds from Vanguard, Fidelity, Morgan Stanley, Principal, T. Rowe Price, and Hartford for at least five years. They’ve already raised the warchest that you’re talking about. Spotify and Slack had fine initial listings, but they are both losing tons of money so the market reacted negatively as their quarterly earnings made this more and more clear. Not a great comparison to a company that has been printing money and hasn’t raised a serious round in years.
- mrgordon 7y ago
  Here is an article from Reuters today that emphasizes that most people expect a direct listing: https://www.reuters.com/article/us-airbnb-ipo/airbnb-plans-public-listing-in-2020-idUSKBN1W41Z7 https://www.reuters.com/article/us-airbnb-ipo/airbnb-plans-p... “In a short statement posted on its website on Thursday, Airbnb did not give any details on how it plans to list its shares, although it is widely expected to take a direct-listing route.”

mbesto 7y ago

1) Impending recession 2) Not enough IPOs so lots of investor interest to deploy capital into something( (thus driving up the price, making it more attractive for startups) 3) We're near the end of a 7~10 year cycle where lots of private VC capital was deployed and needs to be returned 4) 500 private investor maximum SEC rule

theflyinghorse 7y ago
Could you elaborate a bit on the cycle part. Why is it a cycle at all assuming money gets invested all the time instead of once-a-x-years?
- jimbob45 7y ago
  Not that dude but ~11 years ago was the recession so I'm guessing he's alluding to the fact that lots of investment money comes out of hibernation all at once when recessions begin to recede.
- pmart123 7y ago
  The best place to learn about this is to check out the memos Howard Marks has written over the years.
- mbesto 7y ago
  When a VC raises a fund, they usually try to return the money in 7~10 years after they start deploying the capital to startups. In other words, they want to exit their position no later than 10 years and usually shoot for 5~7.
- mdorazio 7y ago
  Simplifying a lot, but... VC companies themselves raise money from investors to create a fund, which is then used to invest in startups. Generally, funds are raised with a specific timeline pitch for returns to the investors - often 7-10 years. In order to return money to investors, the investments in the fund have to actually pay money back to the VC firm - the best way to do this is via IPO (although acquisition is also an option). Due to overall market conditions, a glut of investment happened in the VC space 7-8 years ago (i.e. a bunch of funds were started), and those funds now need to get money back to the investors to prove a nice ROI, so there's a push to get the startups that were funded by the fund to exit one way or another.