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IPOs to watch in 2022

Reddit kicks off 2022 with much-anticipated IPO

The social media giant confirmed its route towards an IPO when it filed a S-1 form with the Securities and Exchange Commission in mid-December.

The company was founded in 2005 by Steve Huffman and Alexis Ohanian and now has more than 52 million daily active users. It sparked controversy in 2021 when its message board drove gigantic share price rises of so-called ‘meme stocks’ such as GameStop [GME] and AMC [AMC].

However, that affair has done little damage to the firm’s figures, with second-quarter numbers showing a 192% year-on-year increase in advertising revenues to $100m. Reddit is likely to be valued at between $10bn and $15bn when it goes public.

This is a chunky number but suffers in comparison with that of Twitter’s [TWTR] $35bn market cap and Meta’s [FB] nearly $1trn despite, as Reuters pointed out, all three firms being founded around the same time.

“Reddit is hoping to be priced at a substantial premium to the typical tech stock IPO this year,” University of Florida finance professor Jay Ritter told Reuters. “As with many money-losing companies going public, the rapid growth rate of revenue offers the potential to have high future profits, justifying a high multiple.”

Rich Greenfield, analyst at research firm LightShed Partners, said the Reddit model is “catnip” for advertisers. “It creates an environment where you can target passionate communities of consumers,” Greenfield said, as reported by Yahoo Finance.

TPG to cash in private equity popularity

The private equity firm is looking to raise $100m when it lists next year on the Nasdaq, although this figure is likely to be a placeholder that may change. Its valuation could be as high as $10bn. The group, which has investments in over 280 companies, told the SEC in its S-1 form that it had $109.1bn in assets under management, up 81% since 2016.

Its portfolio includes firms such as Airbnb [ABNB], Burger King [BKC], McAfee [MCFE] and Fandom [FDM]. For the nine months ended 30 September 2021 it posted revenues of $3.9bn, helped by the rise of private equity and businesses seeking new investment in the pandemic. Investors are also hungry for PE returns in a low interest rate environment.

“Strong demand for private capital’s excess returns drives fundraising across the alternatives categories, benefitting the largest managers the most,” said Paul Gulberg, senior banking analyst at Bloomberg Intelligence. “More assets drive stable fees and profits.”

Crucially, its key personnel will remain when it goes public, including its founding partners and directors David Bonderman (79) and Jim Coulter (62), who will retain their respective titles of non-executive chairman and executive chairman.

The omens look good for a successful float. Shares of rivals Apollo Global Management, KKR & Co, Carlyle Group Inc and Blackstone Inc have all surged higher this year. KKR is up 82%, Apollo is up 51%, Carlyle up 67% and Blackstone up 96%.

IPO could value Mobileye over $50bn

The Israeli arm of computer chip maker Intel [INTC], which specialises in driver-assistance and autonomous driving solutions, is expected to list in the US by the middle of next year. The move, first reported by The Wall Street Journal, could value Mobileye at over $50bn.

According to Reuters, Intel chief executive Pat Gelsinger said the IPO would allow Mobileye to grow more easily as global carmakers spend billions of dollars to accelerate their transition to electric and self-driving vehicles.

“This is the right time,” Gelsinger said. “This is a unique asset and we’re going to make the right moves to fully realize that potential. An IPO provides the best opportunity to build on Mobileye’s track record for innovation and unlock value for shareholders.”

Intel bought Mobileye for around $15bn in 2017 and will retain a majority stake post-listing.

Mobileye’s clients include BMW [BMW], Audi, Volkswagen [XETRA: VOW], Nissan [JP: 7201], Honda [JPX: 7267] and General Motors [GM], with WestPark Capital analyst Ruben Roy expecting it to see compound annual growth of around 25% to 30% over the next several years.

It is in competition with the likes of Nvidia [NVDA] and Qualcomm [QCOM], whose share prices have jumped 122% and 21%, respectively, this year.


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