This year has been another solid one in the initial public offering (IPO) market, with activity continuing to recover from a steep decline after the fourth quarter of 2021.
According to Renaissance Capital, a leading provider of pre-IPO research and IPO-focused ETFs, through November 25 136 IPOs have raised $28.8 billion in 2024, up 32% and 49%, respectively, compared to the same time last year. Performance has also been solid, with the Renaissance IPO Index showing an average return of 25.4%.
A major driver of this year’s success was investors’ strong appetite for VC-backed IPOs. This has especially been the case for those fueled by advancements in artificial intelligence (AI). This trend was highlighted in the standout returns from companies like Astera Labs (ALAB), Reddit (RDDT) and Rubrik (RBRK).
Investors have more to look forward to, with several IPOs likely over the next several months.
IPO market rebound to continue
Overall, momentum and enthusiasm for IPOs seem poised to carry into 2025. With interest rates and inflation moderating and economic growth still healthy, conditions are ripe for an active IPO market.
Venture capitalists, eager to maximize returns, are likely to encourage their portfolio companies to go public in this kind of environment.
As Renaissance Capital notes in its Q3 2024 review, "Private company news points to more robust issuance in 2025 as the IPO market fully normalizes."
Indeed, more companies are testing the waters, making now the best time to explore the most anticipated upcoming IPOs, provided you understand what an IPO is in the first place.
Having covered the most promising upcoming IPOs for Kiplinger for several years, I’ve crafted this latest list to spotlight larger, well-established companies that are sure to gain the attention of both Wall Street and Main Street.
Data is as of November 25. Where possible, we have provided reported expectations for timelines and/or valuations for the upcoming IPOs.
In 2005, Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson co-founded Klarna, which was based in Sweden. They wanted to disrupt the online payments market, which was complicated and expensive. Their concept was to allow for “buy now, pay later” spending.
Generating interest from investors was a big challenge, but the co-founders weren't deterred. They were convinced they were pursuing a massive business opportunity.
Indeed, Klarna would be a catalyst for fueling ecommerce, providing guarantees to buyers and allowing them to try something before making a purchase. This was critical for engendering trust.
Today, Klarna is a massive business, with 85 million total active consumers and 575,000 merchants completing an average of 2.5 million transactions per day on the platform.
Klarna has also invested significantly in generative AI to streamline its operations, partnering with OpenAI to build a sophisticated chatbot for customer support.
During its first month of implementation Klarna's chatbot handled the work of about 700 full-time agents – with roughly the same level of customer satisfaction and improved accuracy. Klarna forecast its chatbot will lead to an improvement of $40 million in profits.
In November, Klarna confidentially filed to go public. An offering is likely to happen next year at a valuation of $15 billion to $20 billion.
Back In 2012, Chris Britt and Ryan King aimed to disrupt the traditional banking industry. It was too expensive, and it failed to serve younger and lower-income people.
So Britt and King co-founded Chime, a mobile-first banking app. Their goal was to reduce and even eliminate fees for things such as minimum balances and overdrafts. Chime also offered competitive interest rates on deposit balances as well as credit cards. And it introduced a feature to allow customers to get paid between paydays.
The formula has paid off. Chime has become the largest digital-only bank, now generating about $1.5 billion in revenue with about 7 million members, according to Forbes.
Chime is also leveraging its platform into other market opportunities, illustrated by its recent acquisition of Salt Labs. Salt Labs develops enterprise software to allow companies to provide rewards programs to employees. This will open up a new revenue stream for the company and establish more distribution channels for the Chime app.
Chime has been investing heavily in AI as well. It recently entered a partnership with FairPlay, a platform for risk management.
About a year ago, Britt said his company was "as IPO-ready as a company can be." It looks like an offering will happen next year, with a valuation of about $8 billion.
At the peak of the dot-com bubble in 2000, Eric Baker co-founded the ticket re-sale platform StubHub. The business was controversial at the time, as it was widely construed simply as scalping. Yet StubHub would gain lots of traction.
A major step for management was the formation of partnerships with professional baseball, basketball and football teams. Baker left StubHub a few years later due to disagreements with his co-founder.
Then, in 2007, eBay (EBAY) bought StubHub for $300 million. Baker had left, but his involvement with StubHub has never really ended. He launched Viagogo Entertainment, a ticketing firm focused on the European market. In 2020, Viagogo bought StubHub from eBay for $4.05 billion.
StubHub now has operations in over 90 countries and more than 130 partners. It sells more than 300 million tickets annually.
The next step? Baker plans to take StubHub public, according to the Wall Street Journal. The valuation is set at over $16 billion.
Actor Ryan Reynolds spent a decade producing the Deadpool film franchise. Much of the franchise's success is traced to the use of guerilla marketing techniques such as leaking footage of scenes.
These efforts would form the basis of a startup, Maximum Effort, that would quickly turn into a highly successful marketing agency. The company developed campaigns for firms like Mint Mobil and Aviation Gin, both of which Reynolds would have substantial ownership stakes in.
In the summer of 2021, Reynolds sold Maximum Effort to MNTN, a fast-growing connected TV advertising platform. He also became the company’s chief creative officer.
Meanwhile, MNTN raised $119 million in a Series D financing led by BlackRock and Fidelity Management and Research Company.
MNTN operates a self-service platform to allow brands to create, target and measure television advertising campaigns. It also has various AI capabilities for targeting and editing videos.
Growth prospects for connected TV certainly look bright. About 88% of U.S. households have at least one internet-enabled TV system.
This means there will be growing demand for platforms like MNTN’s. For example, the spending on connected TV advertising is expected to go from $24.6 billion in 2023 to $42.4 billion by 2027.
To capitalize on this, MNTN is gearing up for an IPO in early 2025, according to a report from Bloomberg. It also looks like the company has retained Morgan Stanley as the underwriter for the offering.
In early 2005, business executive Tony Aquila founded Solera to develop software for risk management of the automotive industry. It would not take him long to gain the interest of investors. A year later, he announced a $100 million funding round from GTCR, a private equity firm.
At the heart of the strategy were aggressive acquisitions, notably Solera's purchase of the Claims Services Group from ADP for $975 million.
By 2007, Solera had IPO'd, providing more resources for management's deal-making. Then, in 2015, Solera went private in a $6.5 billion transaction.
Fast-forward to today: Solera has completed more than 50 acquisitions and built an extensive platform for the purchase, underwriting and claims-processing for insurance as well as the management of repairs, services, maintenance, fleet operations and valuations.
Solera has also established critical partnerships with 20 primary property and casualty insurance carriers, 130,000 repair shops and nine of the top 10 U.S. dealership groups.
The company's vast datasets create a key competitive advantage for Solera, enabling the construction of sophisticated AI models for improving claims management as well as vehicle repairs.
As for the financials, Solera generates hefty cash flow. For fiscal 2024, that figure was $1 billion on sales of $2.4 billion.
And an IPO is in the works, with a deal likely to happen in 2025.
IPOs can be a great way to invest in early stage growth companies. And, yes, the gains can potentially be massive.
Then again, the risks can be substantial. "Market history is littered with examples of 'hot' IPOs that have gone on to become market duds," said Ed Ciancarelli, senior portfolio manager at The Colony Group.
“Lyft, Inc (LYFT) went public at $72 on March of 2019 after pricing above the expected range of $62 to $68 per share," Ciancarelli notes. "LYFT closed the first day of trading at $78 and has not seen that level since. Such broken IPOs become the victim of an overly exuberant market and unattainable expectations." So, an IPO should be considered a higher risk category for your portfolio. For example, it may be best to allocate no more than 5% to 10% in these types of investments.
Before investing in an IPO, you might want to wait until the excitement subsides. "Be patient and wait for the stock price to have its inevitable dip prior to investing," suggests Jeff McClean, CEO at Solidarity Wealth. "Unless you are one of the lucky few who have access to pre-IPO stock at reasonable valuations, patience is the best course."
Moreover, it is a good idea to read the S-1, a regulatory filing that includes important information about the company that is planning to go public. Make sure to focus on the prospectus summary, risk factors and the letter from the founders.
