Hot IPO Slate In 2014 May Include Biggest Launch Ever

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2014: A Look Back And Ahead

The U.S. IPO market of 2013 ranks as the best one in a decade and sets the stage for another dynamic year in 2014.

Some 222 initial public offerings raised $55 billion in 2013, the most in both categories since 2000, according to IPO research and investment firm Renaissance Capital.


These includeTwitter ( TWTR ) -- the biggest tech IPO sinceFacebook ( FB ) -- andHilton Worldwide ( HLT ), the biggest IPO ever for a hotel company and the second largest of 2013.

The largest IPO of the year wasPlains GP Holdings ( PAGP ), which raised $2.8 billion.

The year also saw six stocks jump more than 100% on their first day of trading, as many as the prior seven years combined. The top first-day performer wasSprouts Farmers Market ( SFM ), up 123% on day one.

Initial public offerings are an integral part of U.S economic growth and employment. Whether the IPO market will continue to boom, as always, depends on economic growth and the performance of equity markets.

"If the stock markets stay healthy I expect at least as many IPOs in 2014 as last year," said Jay Ritter, Cordell Professor of Finance at University of Florida, who closely tracks the IPO field.

Waiting At The Gate

Currently 38 companies are registered to go public and seek to raise $6.5 billion, according to market intelligence firm Ipreo.

The IPO pipeline is likely much larger, though. A provision of the Jobs Act of 2012 allows companies with sales of less than $1 billion to begin the IPO registration process while keeping it confidential until about a month before the IPO actually launches.

The biggest IPO on the horizon is China e-commerce giant Alibaba Group, with its IPO likely to exceed the Facebook blockbuster in May 2012 that raised $16 billion.

This year apparently won't see the recently planned IPO of car manufacturer Chrysler Group that was expected to exceed $10 billion. Chrysler's IPO may have died on Jan. 1 when Fiat disclosed that it would buy the 41.5% of Chrysler shares owned by a United Auto Workers trust, giving Fiat 100% ownership.

But a large number of fast-growing technology firms are expected to launch.

"2014 looks to be a strong year for tech IPOs," said Anand Sanwal, CEO of research firm CB Insights. "There seems to be momentum on multiple fronts."

In a recent report, CB Insights counted 590 investor-backed private technology companies in the U.S. with valuations, "real or rumored," of more than $100 million, up from 472 a year ago.

"There's some frothiness, but there are still some very credible solid companies that will test the water this year," said Anand.

Of those 590 companies, e-commerce is the most popular sector, followed by online ad technology management.

Can Alibaba Top Facebook?

Alibaba has the potential to be one of the biggest technology IPOs of all time. Founded in 1999 by Jack Ma, Alibaba is China's largest e-commerce company, with businesses similar toAmazon.com ( AMZN ),eBay (EBAY) and other players.

Alibaba comprises nine companies. They include shopping sites, a payment-processor business similar to PayPal, coupon sites and a search engine site. It also has a cloud-computing business and a business-to-business site.

According to projections by research firm PrivCo, Alibaba's projected offering could exceed $18 billion, with the company achieving a market valuation near $110 billion.

Facebook, the largest tech IPO and second-largest U.S. IPO ever, raised $16 billion and had a market capitalization in its first trading day of $104 billion. PrivCo estimates Alibaba will have sales of $6.85 billion this year, up 68%. The IPO is expected to launch in the first quarter.

Another company that would draw lots of interest is Pinterest, the website where users -- in a process termed "pinning" -- post photos, images and other kinds of content to their profile pages, which other users can follow. Pinterest recently completed a $225 million funding round, giving it a valuation of $3.8 billion.

Other high-profile tech firms expected to conduct IPOs include Square, which provides various payment-processing services for mobile phones and tablets. In September 2012, Square raised more than $200 million in a financing round that reportedly valued the company at $3.35 billion. According to reports, it is seeking another round of financing that would give it a $5 billion valuation.

Others include Box and Dropbox, both providing cloud-based storage and file-sharing services for business and consumers. The list of tech companies also includes music-playing website Spotify and lodging rental website Airbnb.

Other notable companies expected to go public in 2014, according to Renaissance Capital, include CBS Outdoor America, one of the largest providers of billboard advertising, and Univision Communications, the Spanish language U.S. broadcaster. Later in the year Virgin America, the low-fare airline partly owned by British billionaire Richard Branson, also aims to launch an IPO.

Expectations for the IPO class of 2014 are heightened by 2013's fourth-quarter market performance. There were 77 IPOs in the quarter, up 22% from the 63 in the third quarter and up 103% from the year-earlier quarter, according to PricewaterhouseCoopers.

"The environment for IPOs has remained highly accommodative and we expect the new issuance window to remain open as we head into 2014," said Henri Leveque, in a statement accompanying PwC's latest IPO report.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AMZN , FB , HLT , PAGP , SFM

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