Month: December 2019

What does the ‘WeWork effect’ mean for IPOs in 2020?

December 31, 2019

Stripe surpassed Airbnb as the most valuable private company in 2019 thanks to a valuation of $35 billion as of a September 2019 funding round. The company sits in the hot intersection of payments and software, working with companies such as Lyft, Uber and Glossier on payment processing, payouts to contractors and card issuing. E-commerce sales are picking up, and Stripe “does the back end for those kinds of businesses,” riding the rising tide of the online economy, said Santosh Rao, head of research and a partner at Manhattan Venture Partners.

The company has been expanding geographically and adding new enterprise capabilities as it goes up against companies such as PayPal Holdings Inc. PYPL, -0.31% , Square Inc. SQ, +1.20% and Adyen NV ADYEN, +0.00% . Though co-founder John Collison told CNBC earlier this year that the company had “no plans” for an immediate IPO, the company still cracks Rao’s short list. A Stripe spokesman reiterated in an email that there are “no plans” for the company to go public.

There are two other fintech names on Rao’s list: Klarna, which powers installment-payment options and nabbed a $1.4 billion valuation on the private market back in 2014, and Toast, which makes payments products for restaurants and fetched a $2.7 billion private valuation in early 2019.

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Uber and other unicorns flopped on Wall Street this year. Will IPOs rebound in 2020?

December 16, 2019

Investors are also betting that food delivery service Postmates, trading app Robinhood and mattress seller Casper could make waves if they debut on Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken but the bar has changed. Before there was no bar,” said Santosh Rao, head of research at Manhattan Venture Partners, in an interview with CNN Business.

“Investors are now more demanding and want sustainable business models,” he added.

Rao is bullish on the prospects for Airbnb and Postmates if they go public next year. He’s also keeping a close eye on Postmates rival DoorDash, payments company Stripe, Big Data giant Palantir and Chinese ridesharing firm Didi.

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Several unicorns flopped in 2019, will IPOs rebound next year?

December 16, 2019

Stakeholders are also confident that Postmates, a food delivery company and mattress seller Casper are in an excellent position to hit the ground running if they make it to Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken, but the bar has changed. Before there was no bar. Investors are now more demanding and want sustainable business models,” Santosh Rao, head of research at Manhattan Venture Partners, told CNN in an interview.

According to Rao, the stocks of Airbnb and Postmates are likely to maintain a bullish position, if they go public in 2020. DoorDash, a close rival of Postmates is also on Mr Rao’s radar as he remains confident that it will also be one of the listings to look out for in the coming year.

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Snap Inc. Shares Close Up 44% In Stock Market Debut

December 16, 2019

Alibaba raised $21.8 billion in its initial offering, but that total rose to $25 billion after underwriters also sold the so-called green shoe, extra shares companies make available at IPO time. Snap offered its underwriters the option to purchase up to an additional 30 million shares in its green shoe, and will disclose at a later date if they were sold.

Despite the share pop, Santosh Rao, head of research at Manhattan Venture Partners, said the sentiment from investors has been largely negative due to Snap’s expensive valuation compared with its revenue. The app launched in 2011, but generated no revenue until 2015. While advertising efforts have ramped up since, with total revenue reaching $404.5 million in 2016, .

Still, Snapchat is the first major venture-backed technology IPO of 2017, after the number of such offerings plummeted in 2016, and investors wanted to get in on it, he said.

“I think people just want to get in and say, ‘Hey, what’s the worst that can happen?,’” Rao said.

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In the months following listings, the stocks of leading companies languished

December 13, 2019

In the absence of easy access to state markets, however, some companies are debating whether to revert for fresh financing to private market investors because many risk capital and private equity investors are looking for deals.

Rashaun Williams, the general partner of the All-Star Fund at Manhattan Venture Partners, said that the private sector market currently receives trillions of dollars in dry powder to further support private companies.

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Uber, other unicorns flopped on Wall Street

December 13, 2019

Investors are also betting that food delivery service Postmates, trading app Robinhood and mattress seller Casper could make waves if they debut on Wall Street.

“2020 could be a good year for the IPO market. There is a tremendous pipeline. IPOs are not broken but the bar has changed. Before there was no bar,” said Santosh Rao, head of research at Manhattan Venture Partners, in an interview with CNN Business.

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Shelved 2019 US listings create a crowded field for next year

December 10, 2019

But in the absence of easy access to public markets, some companies are debating whether to go back to private market investors for fresh funding, given that many venture capital and private equity investors are searching for deals. “The private market is currently flushed with trillions of dollars of dry powder to continue funding private companies,” said Rashaun Williams, general partner of the All-Star Fund at Manhattan Venture Partners.

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Swelling U.S. IPO backlog points to crowded 2020 field

December 10, 2019

“The private market is currently flushed with trillions of dollars of dry powder to continue funding private companies,” said Rashaun Williams, general partner of the All-Star Fund at Manhattan Venture Partners.

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As Lyft IPO nears, traders wonder whether the numbers match the hype

December 3, 2019

Have the fundamentals improved that much in a few months? Santosh Rao, who evaluates IPOs at Manhattan Venture Partners, says the improvements have been only marginal. “Fundamentals did pick up in the fourth quarter. They are getting more efficient with the drivers and the incentives. But there is a little bit of hype too. You see the squeeze, demand is way above supply.”

Like many on the Street, Rao is trying to justify the nose-bleed prices Lyft is likely to command.

The biggest problem are the huge losses. The company had $2.2 billion in revenue last year with losses of $911 million.

And this is where the Wall Street guys really get into “magical thinking.” Rao explained the reasoning: “Revenues grew 100 percent in 2018, but losses only grew about 40 percent. In that sense, the margins are improving. The sequential progression is improving.”

Rao doesn‘t know when Lyft will make money, but he insists they have bought themselves a lot of time. “The cash burn was $350 million in 2018, but they have $2 billion in the bank, and they are going to raise another $2.5 billion or so in the IPO. So they have a little room. $4.5 billion divided by $350 million implies they have 10 years.”

When pressed on all this “magical thinking,” Rao admits, “A lot of investors just want growth at any price.”

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