This past year was the biggest for the IPO market since the dot-com era of 2000. And the market shows no signs of slowing down.
That's why we've pinpointed the five biggest 2015 IPOs for investors to watch.
According to Renaissance Capital, a manager of IPO-focused ETFs, there are currently 119 IPOs in the pipeline for 2015. Combined, those companies should raise roughly $23 billion.
That comes on the heels of a massive 2014 IPO market. Through the first week in December, 262 companies have raised $82.1 billion through initial public offerings. That's already 50% higher than last year's total, and there is still at least another $1 billion expected to come through five upcoming IPOs.
And the companies that went public in 2014 have been more successful, on average, than the IPOs of the previous 10 years. New stocks have averaged a 13.1% jump from their offer prices this year. Over the previous 10 years, new stocks gained 9.8% on average.
This year's new stocks have also outperformed the Dow Jones Industrial Average, up 6.9% in 2014.
The biggest winners of 2014 have been Radius Health Inc. (Nasdaq: RDUS), GoPro Inc. (Nasdaq: GPRO), and Atara Biotherapeutics Inc. (Nasdaq: ATRA). Those three stocks have gained 186%, 182%, and 177% from their offer prices, respectively.
But the biggest IPO story this year was Alibaba Group Holding Ltd. (NYSE: BABA). The Alibaba IPO was the largest initial public offering in history, raising $25 billion. On Sept. 18, BABA priced its shares at $68 each. Today, those shares are worth more than $106 - a 56% gain in less than three months.
Now it's time to get ready for what's next. As the IPO market continues its momentum into 2015, here are the five biggest upcoming IPOs to watch for the year ahead...
2015 IPOs to Watch, No. 1: GoDaddy Inc.
GoDaddy Inc. is reportedly planning an IPO for early 2015, seeking a $4.5 billion valuation.
The company first filed for an initial public offering in June 2014 and set a placeholder value of $100 million on the deal. Placeholder prices are common among IPO filings; GoDaddy will likely raise much more than that through an IPO.
GoDaddy is a web-domain company with more than 12.2 million customers and 57 million domain names. Founded in 1997, it's best known for its marketing. Its ads feature scantily clad models and celebrities and are run during high-profile events like the Super Bowl.
Advertising has helped the company create strong brand awareness in the United States, and ensures the GoDaddy IPO will be one of the most talked about deals of 2015.
But GoDaddy stock is not on our "best investments of 2015" list...
Despite 17 years in the business, GoDaddy is not profitable. In fact, it reported a loss of $89 million in the first half of 2014.
But the biggest challenge for GoDaddy stock will be its competition. Google Inc. (Nasdaq: GOOGL) unveiled its "Google Domain" business last summer, and that will be a major problem for GoDaddy. As one of the biggest tech companies in the world, Google has far better resources and brand recognition.
Don't follow the crowd - right now, GoDaddy looks like an IPO to avoid in 2015.
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2015 IPOs to Watch, No. 2: Uber Inc.
On Dec. 4, Uber Inc. Chief Executive Officer Travis Kalanick announced the company raised $1.2 billion in its most recent round of funding. Now, the ride-booking company is valued at $40 billion.
And there could be more money on the way. In his announcement, Kalanick left the door open for additional funding when he said there is "additional capacity remaining for strategic investments."
With a $40 billion valuation, Uber is the highest valued startup in the world by a whopping $30 billion. Uber had completed a previous round of funding in June that valued the company at $17 billion. Through six rounds of funding since 2009, the company has raised $2.8 billion.
Uber's major appeal to investors is that it's disrupting an untouched market. The taxi industry has operated for years with relatively few changes and competitors. With Uber, consumers have a viable third option between taking a taxi cab or paying exorbitant prices for a private car service.
According to TechCrunch, Uber brought in approximately $213 million in revenue in 2013. Moreover, revenue has been doubling every six months, which constitutes an annual growth rate of nearly 145%. The New York Times claims that Uber could potentially bring in $1 billion in annual revenue if it's able to capture a 50% market share of the U.S. taxi industry. We'll get a better idea of Uber's market share when the company files for an IPO.
Because of this recent round of funding, Uber can put off an IPO until late 2015. That's a good thing as it gives the company time to address a couple recent scandals it needs to deal with now if it wants to attract investors. One involved controversial quotes from a senior vice president while the other triggered privacy concerns.
2015 IPOs to Watch No. 3: Xiaomi Inc.
Its name may not resonate in the United States, but Xiaomi Inc. is the third-largest provider of smartphones in the world, trailing only Apple Inc. (Nasdaq: AAPL) and Samsung.
According to the South China Morning Post, Xiaomi is on pace to sell 60 million smartphones for the full-year 2014. In 2015, the company expects to sell 100 million devices.
However, the same report indicates that profits may be lackluster. The company sells many of its devices near their break-even point. The average device sold by Xiaomi retails at about $150. Apple's iPhones retail for as much as $600 each in the United States.
The company reportedly plans to hold an IPO in early 2015. While the size of the deal is unknown, the company is expected to be valued in the $50 billion range.
Few Americans know about Xiaomi, but a U.S. IPO would be a big story due to the recent performance of Chinese stocks.
In 2014, China's largest Internet search company, Baidu Inc. (Nasdaq ADR: BIDU), has gained 26%. The Chinese online automobile seller Bitauto Holding Ltd. (NYSE ADR: BITA) is up 122% in 2014. After holding the largest IPO in history, Alibaba is up 56% from its offer price.
A debut from Xiaomi stock in 2015 would be welcomed by investors looking to play the growing Chinese market. It's unclear whether Xiaomi will debut in the United States or China, but the recent success of Chinese companies in the U.S. could sway that decision.
2015 IPOs to Watch No. 4: Box Inc.
Box Inc. originally filed for an IPO on March 24, 2014. At the time, CEO Aaron Levie attached a price tag of $250 million on the deal. However, the company has delayed its offering several times this year due to market volatility. Now Box has an early 2015 debut target.
Box is a cloud-storage company with more than 25 million registered users and works with more than 34,000 companies, including Procter & Gamble Co. (NYSE: PG), Pandora Media Inc. (NYSE: P), and Nationwide Insurance.
The good news for Box is that its market is expanding. Earlier this year, Forrester Research estimated that the cloud computing industry will grow to $241 billion by 2020.
While the Box IPO will grab headlines in 2015, the company comes with too many questions to be considered a sound investment right now.
For one, Box is still unprofitable. When the company released financial information in March, Box noted that losses had widened in the last year from $112.6 million to $168.8 million. The company also admitted it doesn't expect to be profitable "for the foreseeable future" as it focuses on marketing and sales development.
The company also faces stiff competition. Rival Dropbox has also been contemplating an IPO throughout 2014, and offers a very similar service. Microsoft Corp. (Nasdaq: MSFT) has been upgrading its "OneDrive for Business" product to directly compete with Box and Dropbox. Amazon.com Inc. (Nasdaq: AMZN) has also entered the space with its Zocalo service.
2015 IPOs to Watch No. 5: Airbnb Inc.
Airbnb Inc. operates a website that allows users to rent different types of properties including apartments and houses. It's a disruptive technology, one that targets the hotel industry.
The company was founded in 2008 and has already raised $800 million through seven rounds of funding. Airbnb is valued at $10 billion, making it one of the highest valued startups on the market today. At that price, Airbnb is in the same company as established hotel chains Wyndham Worldwide Corp. (NYSE: WYN) and Hyatt Hotels Corp. (NYSE: H), which are valued at $10.5 billion and $9.1 billion respectively.
Through October 2013, the company had been used by over 9 million guests in its five years of existence. For the full-year 2013, the company reported 6 million new guests.
Airbnb generates revenue by charging hosts 3% and guests between 6% and 12% on stays. The company has not officially filed for an IPO yet, so specific revenue and income figures are still unknown.
But the company does face some challenges on the regulatory front...
In New York, for example, Attorney General Eric Schneiderman has claimed that 75% of Airbnb's rentals are illegal and violate hotel tax laws. The company's ongoing battle with regulators will be a storyline to watch moving forward.
For now, it's impossible to make a prediction on the size of the Airbnb IPO or the value of Airbnb stock. However, the company's disruptive technology ensures the initial public offering is one to watch in 2015.
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Related Articles:
- South China Morning Post: Xiaomi Eyes IPO Early Next Year
- Wall Street Journal: Box Continues Playing the IPO Waiting Game - But for How Long
- Wall Street Journal: Airbnb Weighs Employee Stock Sale at $13 Billion Valuation