The initial public offering (IPO) market has remained mostly a ghost town after a stellar 2021. Last year was one of the worst on record, with a measly 70 offerings and $7.7 billion raised, according to Renaissance Capital. But we might start to see signs of life again in the coming months, with investors preparing for some of the most anticipated upcoming IPOs of 2023 to hit the market.
There has already been some improvement this year. For the first quarter, the amount raised came to $2.3 billion and there were 29 IPOs.
However, the implosion of Silicon Valley Bank is a major factor in depressing recent deal activity. This wreaked havoc on the financing market for startups, and added to continued worries about slowing economic growth, persistent inflation and high interest rates.
But investors should not give up hope.
IPO Market Could Rebound
"We still expect a pickup in activity in the second half of 2023, although it may be quieter than previously anticipated," says Angelo Bochanis, IPO data and content analyst at Renaissance Capital (opens in new tab). "Stable and profitable businesses remain more likely to IPO in the near term, although a number of large tech names have recently reiterated interest in going public. We note that our Renaissance IPO Index – tracked by our IPO ETF – is up +14% year-to-date, and we've seen that many companies which go public in tougher market conditions outperform in the long run."
Additionally, Johnson & Johnson's (JNJ (opens in new tab)) recent spinoff of its consumer health products division Kenvue (KVUE (opens in new tab)) raised $3.8 billion – the most money from an initial public offering since late 2021, according to Renaissance Capital. This is a good sign for high-quality companies set to go public this year.
Indeed, we're starting to see a few more companies testing the waters, making now the best time to explore the most anticipated upcoming IPOs for 2023. I have covered the best upcoming IPOs to watch for Kiplinger for several years now, and this list of eight is a smaller number than we typically expect at this time of year because of recent market weakness. Still, I focused on large, more established names that should generate plenty of excitement on Wall Street and Main Street alike.
Data is as of May 8. Where possible, we have provided reported expectations for timelines and/or valuations for the upcoming IPOs.
Arm
- Expected IPO timeline: 2023
- Estimated IPO valuation: $50 billion
Founded 30 years ago, Arm (opens in new tab) is one of the world's largest semiconductor companies. It has shipped more than 230 billion chips across the world and its technologies impact about 70% of the world's population.
In the latest quarter, Arm reported $746 million in revenues, up 28% year-over-year, and shipped a record 8.0 billion chips. The adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $450 million. There was growth across all market segments, with strong results with automotive and IoT (Internet-of-Things) solutions. The company is also making investment in the emerging category of the metaverse.
In September 2020, rival chipmaker Nvidia (NVDA (opens in new tab)) agreed to buy Arm from its owner, SoftBank Group, for $40 billion. However, the deal became subject to intense antitrust scrutiny, and the parties abandoned the proposed acquisition in early 2022.
Arm is now looking at a public offering. In late April, the company said it had confidentially submitted paperwork (opens in new tab) for an initial public offering. A Reuters report (opens in new tab) indicates Arm's parent company SoftBank Group is looking at Goldman Sachs (GS (opens in new tab)), JPMorgan Chase (JPM (opens in new tab)), Barclays (BCS (opens in new tab)) and Mizuho Financial Group to be the lead underwriters for the IPO.
While the exact timing of the deal is unknown, it is expected to happen later this year. This makes Arm one of the hottest IPOs to watch for in 2023 – and likely one of the best semiconductor stocks to watch once it goes public.
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Navan
- Expected IPO timeline: Second half of 2023
- Estimated IPO valuation: $9.2 billion
Founded in 2015, Navan (opens in new tab) operates a platform that provides travel and expense management for businesses. The company, which recently changed its name from TripActions (opens in new tab), leverages next-generation technologies like machine learning and artificial intelligence to lower costs and improve the user experience. It also added ChatGPT technologies that can assist with things like creating personalized itineraries.
When the COVID-19 pandemic emerged, Navan suffered a steep decline in business and the company had to lay off hundreds of employees. But it was able to secure financing – which helped keep the business afloat.
Navan has since made a strong comeback and continues to innovate its platform. For example, the company rolled out its global rapid reimbursements program. This allows employees to get reimbursed within 24 to 48 hours.
The company has also been focused on acquisitions. Some of the deals include Resia and Comtravo – two European-based travel management companies. Then there was the purchase of Reed & Mackay, a provider of services for high-end business travel and events.
In October, Navan announced a $304 million funding (opens in new tab) at a valuation of $9.2 billion, up two times since 2020. The company also confidentially filed for its upcoming IPO. This deal is likely to happen in the second half of 2023.
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Databricks
- Expected IPO timeline: 2023
- Estimated IPO valuation: N/A
A little more than a decade ago, a group of computer science students at the University of California, Berkeley created Apache Spark, an open-source system meant to manage big data. The platform achieved massive adoption alongside growing needs to use systems, such as artificial intelligence and machine learning.
A few years later, those students would go on to launch Databricks (opens in new tab) to commercialize the software for enterprises. Over the years, the company has amassed a customer base of more than 7,000, and includes companies like Shell (SHEL (opens in new tab)), Regeneron Pharmaceuticals (REGN (opens in new tab)), CVS Health (CVS (opens in new tab)) and Comcast (CMCSA (opens in new tab)).
Databricks also has an ecosystem of hundreds of partners, including blue chip stocks Microsoft (MSFT (opens in new tab)) and Amazon.com (AMZN (opens in new tab)), as well as consulting company Booz Allen Hamilton (BAH (opens in new tab)) and Paris-based IT services firm Capgemini (CAPMF (opens in new tab)).
For many companies, working with data is challenging. Part of this is due to the information being stored in silos. But there are also problems with processing data to get useful insights.
The Databricks platform allows for managing the data regardless of where it is stored. This makes it possible for real-time analytics, which can be crucial for making better decisions.
Databricks has also been creating ChatGPT systems. There are currently more than 1,000 customers for this technology. Databricks recently launched its Dolly large-language model, which is open source. This allows for more control and security for enterprises.
As far as upcoming IPOs go, details around one for Databricks are currently unknown. Still, the company in late 2021 announced its latest funding (opens in new tab). It raised $1.6 billion at a valuation of $38 billion. Some of the investors include Amazon Web Services, CapitalG – the venture fund of Alphabet's (GOOGL (opens in new tab)) Google – and Microsoft.
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Intercom
- Expected IPO timeline: 2023
- Estimated IPO valuation: N/A
Founded in 2011, Intercom (opens in new tab) builds technologies to improve customer engagement for sales, marketing and support. The company has more than 25,000 customers and the platform delivers over 500 million messages per month.
With the uncertainties about the economy, there is definitely more emphasis on customer engagement. As for Intercom, its solution provides personalized communications and has been shown to generate strong ROI (return on investment). For example, digital analytics software firm Amplitude saved $1 million (opens in new tab) in costs and increased customer engagement rates by at least 25% by using Intercom.
Intercom has been aggressive in working with ChatGPT technology. In March, it announced its Fin service bot, which is powered by OpenAI's GPT-4 platform. There is no setup or training required. Instead, Fin learns how to operate by analyzing company information.
Unlike many other tech startups, Intercom has not raised huge amounts of venture capital funding. The last infusion of capital came in 2018. At the time, the company raised $125 million. In other words, Intercom has been fairly efficient with its funds.
Jaime Moreno de los Rios, who is the chief operating officer of financial products and services firm Secfi, says that the company is on track for an IPO in 2023. "They have since seen strong growth and have grown into their last valuation," he said.
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Stripe
- Expected IPO timeline: 2023
- Estimated IPO valuation: $50 billion
The payments industry is not particularly exciting, but it can be lucrative and the growth prospects look bright as more transactions continue to move online.
A major beneficiary of this is Stripe (opens in new tab). Founded in 2010, the company has built an easy-to-use system for online payments. It's only a matter of using a few lines of code.
The founders of the company are brothers: Patrick and John Collison. They got the inspiration for Stripe when they had challenges using existing payments solutions for their startups.
As for the past year, Stripe has had to face difficulties with its business. The company has a large number of startups as customers, which have seen decelerated growth. As a result, Stripe cut 14% of its workforce (opens in new tab), or about 1,120 employees.
Despite this, the business remains robust. Consider that about 100 customers manage more than $1 billion in annual payments on the platform.
In March, the company announced a Series I round of funding for over $6.5 billion at a $50 billion valuation. This makes the company one of the most valuable startups in the world.
What about a public offering? It looks like Stripe could be one of the hottest upcoming IPOs to watch for in 2023.
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Klaviyo
- Expected IPO timeline: Late 2023
- Estimated IPO valuation: $9.5 billion
In 2012, Andrew Bialecki and Ed Hallen cofounded Klaviyo (opens in new tab) (the name is an inspiration from the Spanish word for mountaineering pins or pitons). They set out to build a platform to help manage data.
In a few years, the company started to focus on helping customers with targeted and personalized marketing, such as with emails and text messages. Even though the space was intensely competitive, Klaviyo was able to stand out because of its deep expertise with data analytics. It also leveraged a strategic partnership with large-cap tech stock Shopify (SHOP (opens in new tab)), which last year made a $100 million investment in Klaviyo.
Currently, Klaviyo has over 100,000 customers, including Unilever (UL (opens in new tab)) and Citizen Watches. In 2022, revenue was over $575 million and the company was profitable.
According to a report in The Wall Street Journal, Klaviyo has hired Goldman Sachs (opens in new tab) to prepare for a public offering. A deal is likely in the fall.
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BMC Software
- Expected IPO timeline: 2023
- Estimated IPO valuation: $14.5 billion
Founded in 1980, BMC Software (opens in new tab) began as a developer of software for IBM (IBM (opens in new tab)) mainframe systems. Growth was strong, but started to lag at the end of the decade. This is why the company diversified its product line into other categories, such as for Windows systems. A big part of the growth strategy was through acquisitions.
Today, mainframe systems remain a significant segment of the overall business. However, BMC has modernized its offerings, including with artificial intelligence and machine learning capabilities.
BMC also has strong footprints in other important categories like DevOps, AIOps, service management, security, cloud infrastructure management and workflow orchestration. The company has about 86% of the Forbes Global 50 as customers.
The company previously traded as a public stock from 1988 until 2013. It was then taken private in a transaction valued at about $6.9 billion. The acquirers included Bain Capital and Golden Gate Capital. Five years later, private equity firm KKR (KKR (opens in new tab)) purchased BMC Software for $8.5 billion (opens in new tab).
Now it appears that the company will return to the public markets. BMC Software recently made a confidential filing for an IPO (opens in new tab). The estimated valuation is at about $14 to $15 billion.
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Instacart
- Expected IPO timeline: Mid-2023
- Estimated IPO valuation: $11 billion
Instacart (opens in new tab), which operates a grocery-delivery network, experienced a surge in growth because of the pandemic. But as the impact of COVID-19 fades, it's been tougher for the company.
Another problem is competition. Besides having to deal with online rivals like Uber Technologies (UBER (opens in new tab)) and DoorDash (DASH (opens in new tab)), there are also traditional operators that have entered the market. Some of the largest include Dow stock Walmart (WMT (opens in new tab)) and grocery chain Kroger (KR (opens in new tab)).
To find new opportunities, Instacart has diversified into other categories. For example, it launched Instacart Health last September, which delivers healthier products.
Instacart has also been aggressive in adding more stores to its platform. It also expanded its advertising capabilities, and introduced a system to allow for food-stamp payments.
The strategy seems to be working. In the fourth quarter, revenue soared by over 50% year-over-year and gross profits jumped 80%, according to The Wall Street Journal (opens in new tab). By comparison, for the whole fiscal year, the company's growth rate was 39%. Instacart is also generating positive EBITDA.
Late last year, the company attempted an IPO, but suspended it because of market volatility. However, the paperwork remains in place, so Instacart remains one of the hottest upcoming IPOs to watch for once the market becomes more attractive.
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