With the stock market experiencing high volatility and new technology-based companies emerging every day, Initial Public Offerings (IPOs) have become an exciting way to invest and gain profits. In 2023, the IPO market is expected to be even more thrilling, with several highly-anticipated companies going public. From electric vehicle manufacturers to software companies, investors have plenty of options to choose from.
The year 2022 did not witness a successful run for U.S. initial public offerings, as there were only 181 IPOs recorded as of December 26. This figure represents a significant decline from 1,035 IPOs that took place in 2021, indicating an 83% drop. As a result, the total cash values of IPOs have also taken a hit, with $7.7 billion recorded so far in 2022, which is down by over 94% compared to 2021. The performance of some high-profile IPOs launched in 2021, such as Rivian Automotive Inc. (RIVN) and Robinhood Markets Inc. (HOOD), could have been much better.
These stocks have seen significant drops in value, with Rivian shares declining by 82.9% in 2022, while Robinhood shares have fallen by 56.6%. Nonetheless, the IPO market is hopeful for a better run in 2023, with several promising flotations lined up. If the market conditions improve and IPOs are given the green light in 2023, these top-performing companies are expected to lead the pack.
What Does “Going Public” Mean?
When we say that a company has “gone public,” it means that the company has offered its shares to the general public for the first time by listing them on a stock exchange. This process is also known as an initial public offering (IPO).
Before going public, a company is typically privately owned and financed by a small group of investors, often including the founders. By going public, a company can raise capital from a much larger pool of investors, including individual investors, institutional investors, and mutual funds.
In an IPO, the company issues new shares of stock and sells them to the public, typically through an underwriting process in which investment banks purchase the shares from the company and then sell them to investors. The price of the shares is determined through demand and supply based on the company’s financial performance, growth prospects, and other factors.
Once a company has gone public, its shares are listed on a stock exchange, and investors can buy and sell them on the open market. The company must also disclose financial and other information to the public regularly, including quarterly and annual reports, to comply with securities regulations and maintain investor confidence.
The table below lists 10 companies that are highly anticipated to go public in 2023 as of March 2023, along with their potential IPO valuation. Details of these companies are discussed after the table.
Companies | Potential 2023 IPO Valuation | |
1 | Stripe Inc. | $59 billion to $74 billion |
2 | Arm | $40 billion to $60 billion |
3 | Databricks Inc. | $38 billion |
4 | Chime Financial Inc. | $25 billion |
5 | Discord Inc. | $15 billion |
6 | Reddit Inc. | $10 billion to $15 billion |
7 | Instacart Inc. | $13 billion |
8 | Plaid Inc. | $13 billion |
9 | TripActions Inc. | $12 billion |
10 | Klarna Bank AB | $6.7 billion |
Stripe Inc.
At the beginning of 2022, Stripe Inc., a company that provides digital payment processing services, had a higher valuation of approximately $94 billion. Still, it now heads into 2023 with a reduced valuation of about $74 billion. During the “fintech winter” of 2022, Stripe also reduced its workforce by 14%, which was intended to demonstrate to investors that the company is a sustainable long-term investment. As investors have cash available and are looking to invest, Stripe could potentially be their most attractive IPO option in 2023.
Arm
With its products integrated into the daily lives of 70% of people worldwide, this semiconductor company has a global presence. In 2020, it was on the brink of being acquired by Nvidia Corp. (NVDA), but it has since gained momentum on its own, reporting $656 million in revenue and a 9% rise in microchip shipments during its most recent quarter. The company’s leadership has described its IPO preparations as “advanced,” indicating that it is making significant progress toward going public. As a result, the company is considered one of the most noteworthy and promising IPOs for 2023, with an impending IPO being a significant milestone for the company.
Databricks Inc
Databricks, a San Francisco-based company established in 2013, is leading the charge in the cloud computing/big data revolution. The company is committed to making cloud computing more streamlined and manageable for its 5,000 clients worldwide. Despite no specific dates for an IPO, the company’s financials, including its revenue exceeding $1 billion and an increasing year-on-year growth rate, suggest that it is a strong contender for a high-profile IPO in 2023.
Chime Financial Inc.
Chime, a mobile-banking services provider based in San Francisco, was originally planning an IPO in early 2022, with a projected valuation ranging from $35 billion to $45 billion. However, due to significant financial losses in the fintech industry, the company chose not to proceed with the IPO. Nevertheless, the IPO market anticipates that Chime will go public in 2023. The company’s founder and CEO, Chris Britt, appears wholly committed to the idea, stating that Chime “has every intention of being a large, independent company.” Britt may be paving the way for a 2023 IPO by implementing a significant cost-cutting measure in early 2022, resulting in a 12% reduction in Chime’s workforce.
Discord Inc.
Discord, a San Francisco-based instant-messaging platform, boasts over 13.5 million active servers and 150 million monthly users. The company was originally planning to launch its IPO in 2022 but faced challenges due to a lackluster stock market that resulted in the postponement of its IPO until 2023—although receiving a $12 billion buyout offer from Microsoft Corp. (MSFT), a potential competitor in the highly competitive online video game messaging market, Discord management opted to decline the offer. The company plans to proceed with its proposed IPO, with a $15 billion valuation set for the upcoming year.
Reddit Inc.
Reddit, a social media platform with 1.2 billion users and 52 million active daily users, is preparing for its 2023 IPO. The platform has a dedicated following, particularly among “meme investors,” who view Reddit as a social media hub for the average investor. With a projected valuation of $10 billion to $15 billion, and its IPO set to debut in mid-2023, Reddit represents a significant opportunity for growth and is expected to be one of the most promising IPOs of the year.
Instacart Inc.
The IPO plans for Instacart in 2022 were postponed in October without any clear explanation from the company, leading analysts to attribute it to a weak IPO market and shaky stock market conditions. Unfortunately, this setback occurred just as the company had garnered a valuation of more than $39 billion from a recent funding round in 2021. The valuation has since taken a significant hit, dropping to $24 billion in 2022 – a decline of almost 40%. As a result, Instacart has initiated cost-cutting measures, including a reduction of 3,000 jobs and a freeze on new hires, to impress investors for its expected 2023 IPO.
Plaid Inc.
Plaid’s goal is to ensure safe and strategic interaction between online financial consumers and businesses, as the vast majority of Americans now bank digitally. While the company has a market valuation of $13 billion and an estimated revenue growth rate of 60%, its IPO was put on hold due to the fintech winter of 2022. Although there is no guarantee that Plaid will go public in 2023, if inflation decreases, interest rates drop. The company’s prospects may improve when investors return to the market, leading to a potential IPO.
TripActions Inc.
During the final quarter of 2022, a startup that provides services for handling staff expenses related to business trips raised $400 million, with most of the funding coming from Goldman Sachs. This company has over 8,000 corporate clients and has acquired four global travel companies. They have also filed for an IPO in the spring of 2023, with an expected valuation of $12 billion. The company seems to have a strong chance of success once the economic situation improves.
Klarna Bank AB
The leader in the buy-now-pay-later (BNPL) industry had a challenging year in 2022, losing $580 million in the first six months and laying off 10% of its workforce. The company, headquartered in Sweden, had planned to launch its IPO in 2022 with a valuation of $50 billion, but has postponed it until 2023. Klarna argues that a weak global economy and higher interest rates deterred potential BNPL customers in 2022, but these customers are expected to return in large numbers when economic conditions improve. Klarna’s business model, which earns revenue from both merchants (who pay transaction fees) and shoppers (who may pay loan interest and user fees), is intriguing and could make it a strong candidate for an IPO in 2023.