After several years of slow IPO activity, several private companies are ready to hit the public markets.
It took some time, but private companies are now swarming to go public after several initial public offerings (IPOs) saw their stocks melt up due to huge investor demand. Now, others are ready to jump in.
IPOs in the crypto industry or those that can tap into artificial intelligence (AI) have done extraordinarily well. Investors should understand that some of these IPOs have gone public with a low initial float available for public trading amid high demand for shares, sending prices soaring right out of the gate. Investors don’t need to chase shares of IPOs, but they should keep these companies on their radar in case the valuation is attractive or wait for better entry points. Here are three planned IPOs to watch.
Sweden’s buy-now, pay-later (BNPL) giant Klarna is aiming to raise about $1.27 billion in an IPO that would value the company at $14 billion. The company plans to sell more than 34.3 million shares and price them from $35 to $37 per share. It will follow in the footsteps of the digital banking platform Chime, which got off to a hot start but now trades below its initial listing price.
BNPL companies let consumers purchase products with no money down and pay them over installment payments with no interest or some interest, depending on the product and buyer. Klarna partners with a number of top merchants and companies, and its gross merchandise volume (GMV) nearly double in 2024 to $105 billion. The company also boasts a lot of artificial intelligence tools and efficiencies.
In 2024, Klarna did manage to break even despite expense growth of roughly 13%. Revenue grew about 24% year over year. The company’s potential valuation means that Klarna would trade at a price-to-sales multiple of about 5, which isn’t bad for a fast grower in today’s market. I don’t mind investors dipping their toe in the water at that valuation, but they should also be aware that these companies can be highly cyclical. I would avoid chasing shares out of the gate if the stock jumps initially.
After watching Circle’s strong performance, crypto and blockchain companies see the current environment as prime time to go public. Figure Technology Solutions is planning to raise more than $520 million and target a $4.1 billion valuation. The company expects to issue roughly 21.5 million shares priced between $18 and $20 per share, and existing shareholders are offering another 4.2 million shares.
SoFi’s former Chief Financial Officer Mike Cagney is the founder of Figure, which is a blockchain-based lender that offers home equity lines of credit, crypto-backed loans, and also a crypto exchange for customers to trade and invest on. Figure is intriguing because it is using the technological aspect of blockchain technology and applying it to the traditional lending process, specifically to improve legacy systems by speeding up and lowering the cost of the loan applications and actual funding, while also utilizing digital liens. Figure’s technology utilizes smart-contract functionality and is tokenizing real-world assets.
Through the first six months of the year, Figure generated $0.15 diluted earnings per share and revenue of nearly $43.8 million, up roughly 250% from the same time period last year. Although a fast grower, the $4.1 billion valuation is still pretty lofty.
What I think it will all come down to is the company’s ability to maintain solid credit quality, as investors are still largely skeptical over whether technology and AI can truly underwrite better than the legacy processes. Figure says that loss rates as of June 30 of this year are below 1% of total loan volume. The company’s HELOC securitizations have received top grades from major credit rating companies, with some tranches rated AAA.
While I actually find Figure to be the most intriguing near-term IPO, I do think investors are going to want more credit information before they feel truly comfortable investing in a blockchain lender.
Founded by Tyler and Cameron Winklevoss, the crypto exchange Gemini will become the third crypto exchange to hit the public markets and is targeting as much as a $2.2 billion valuation. The company intends to sell close to 16.7 million shares priced between $17 to $19 each and raise as much as $317 million.
Since launching in 2014, the company has handled more than $285 billion in trading volume and currently has more than $18 billion of crypto under custody. Gemini caters to retail and institutional investors. Additionally, Gemini has come out with its own credit card that lets users earn crypto rewards for every transaction. Gemini also offers users a digital production studio that helps content creators and brands reach digital audiences.
Through the first six months of the year, Gemini’s revenue fell about 8.5% to roughly $68 million. Meanwhile, the company’s operating loss widened by about $29 million to $113.5 million, and the net loss also expanded significantly to about $282 million.
Most of the company’s revenue today is based on transaction revenue, which is heavily influenced by crypto trading volume on the platform, and that is heavily influenced by gyrations in the crypto market. Gemini has been increasing its services revenue nicely, which is composed of credit card revenue, staking, and custodial fees. However, with the valuation pricing the stock at 16 times projected 2025 revenue and given that Gemini is in a competitive market, I have no interest at this time.
