2019 IPO Spotlight: Slack and Robinhood
2018 was quite an impressive year for IPOs.
Even with market volatility, we saw 274 IPOs last year, which raised more than $64.74 billion. That, by the way, was a marked improvement over the 234 IPOs of 2017, which raised $52.41 billion. But neither may be able to catch the potential of 2019.
With Uber, Lyft, and Palantir prepping to go public, this could be the best year on record.
Uber alone could have a $120 billion valuation – and no, that’s not a typo. Palantir could carry a valuation of $41 billion. Lyft could is currently valued at $15.1 billion.
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Even Slack and Robinhood have multi-billion-dollar valuations.
At the moment, Slack – which operates as a workplace instant-messaging and collaboration app – may IPO in the second quarter of 2019. It also has plans to IPO through a direct listing, which would help it bypass the traditional underwriting. It also allows for the open market to play a bigger role in setting the IPO price.
With its group communication app, the company has more than eight million daily active users and three million paid users. The company also managed to raise more than $1 billion since launching in 2013. The company believes it can achieve a valuation of at least $7 billion.
Unlike your traditional brokerage that earns money on commissions, Robinhood earns revenue from interest and cash on its accounts, and from premium subscriptions. The company could be valued at $5.6 billion out of the gate. In addition, it currently has about five million users.
However, as exciting as IPOs may be, there is never a guarantee of success.
The only real way to trade IPOs is by owning all of them at the same time – while profiting from the diversification and excitement all at once.
As we’ve noted, the best way to do just that is with the First Trust IPO Index Fund (FPX).
Remember, the FPX tracks hot IPOs in their first 1,000 days of trading. By buying it, not only can you avoid paying gobs of money for IPOs that may or may not work out, but you’re also being exposed to multiple hot IPOs at the same time at lesser cost.
Plus, as you can see, the FPX never once took a hit on any of the failed IPOs either.
In fact, even with some of the most obnoxious IPO failures, the ETF managed to run from a 2009 low of around $11 to a recent high of $75. It’s a safer alternative than risking your hard-earned money to another potential flop. With the FPX, it doesn’t matter if the stock is hot or a dud, the excitement surrounding IPOs continues to send the FPX to new highs.
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