IPO Market Heats Up Again

Issue 23

06.15.20 - A sign of renewed market confidence has been signaled with companies once again seeking to go public. On the heels of Warner Music Groups' announcement to proceed forward with their IPO despite the COVID-19 Pandemic, two other notable companies have dropped S1 filings - Quicken Loans and Lemonade.

Quicken Loans is particularly interesting, it is the largest mortgage lender in the United States, and it funded over $146 billion in mortgages in 2019. The pandemic only helped is business with the Federal Reserve cutting rates to record lows, homeowners have been making a mad dash to refinance. It could be the largest IPO of this year potentially being valued at tens of billions of dollars on the public markets. However, we should still not put out of mind the fiasco with a similar Fintech lending giant LendingClub.

Should their IPO and business continue to be successful, this could set the tone for other sought-after Fintech companies, such as Robinhood, to proceed forward with anticipated public offerings as well.

The next notable S1 filing is Lemonade, the SoftBank backed insurance startup. The startup, which uses AI and “behavioral economics” to calculate insurance rates for homeowners and renter’s insurance is not yet profitable but is a darling in the insuretech world. It insured 425,000 homes in 2018 and saw its revenue grow by nearly 200 percent in 2019. Morgan Stanley and Goldman Sachs are among the offering’s underwriters.

But wait, there’s more…Another IPO that has yet to file an S1 is Peter Theil’s Palantir Technologies with private valuations north of $20B. According to Bloomberg and Reuters, the company is said to have been planning to confidentially file for an IPO within the next few weeks. Palantir in a roundabout way, helps organizations manage and secure its data. The company has notable clients such as Citi Bank, Morgan Stanley, Airbus, Fiat-Chrysler, the CIA, the Pentagon, and the FBI. The company reported revenues in 2019 of $739M.

In a not so roundabout way, Palantir’s business is essentially talent arbitrage. It’s McKinsey but for software engineers. They build tools to solve data problems for organizations - so while ICE and the FBI might have trouble luring top Silicon Valley talent, Palantir doesn’t. The federal government can’t give its employees 14-course meals with lobster and Google level perks because congress & the taxpayers would pitch a fit, but Palantir as a private company can.

Although the company has the gift that keeps on giving in the form of government contracts, it has problems. It hasn’t posted a profit in its 16-year history but it has told investors that it expects to break even this year with revenues of $1B despite the economic slowdown.

Source: Wall Street Journal, Crunchbase News