As somebody who’s always on the prowl for the next big growth stock, it’s no wonder I’m constantly monitoring the IPO market.
While IPOs were in a serious drought in 2023 – just 108 new companies came public, raising $19.4 billion – activity has begun to pick up this year.
There have been 140 IPOs that have priced so far this year (+32%) raising $28.8 million (+49%).
And it’s looking even better for 2025. That spells opportunity to me!
One of the two names I’ve been looking forward to the most just priced shares this week. And the second should be coming public early in 2025.
I’ll talk more about these two companies in just a minute. But first, a few words on why the IPO market is heating up.
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IPO Market Heating Up
Goldman Sachs publishes an insightful IPO Issuance Barometer for the U.S. It’s based on five components and measures how conducive the macro environment is for IPOs.
This barometer currently stands at 137, well above the reading of 100, which is consistent with the typical frequency of IPOs.
This is bullish, not just for the IPO market but for other M&A activity as well. Deal volume has already been trending higher relative to last year. And it feels like I’m hearing about deals every week that are related to companies I’m familiar with.
This week it was Omnicon’s (OMC) proposed acquisition of Interpublic Group (IPG) and Gen Digital’s (GEN) announcement that it would acquire MoneyLion (ML).
There’s good reason to think that M&A and IPO activity will continue to accelerate under a Trump administration. While details remain fuzzy, the Republican agenda favors deregulation, which greases the wheels for business combinations and new offerings.
A relatively stable stock market is also good for IPOs, as is improved confidence among corporate execs, investment banks and investors.
Here are two upcoming IPOs I suggest keeping an eye on.
2 Upcoming IPOs to Watch
ServiceTitan (TTAN)
Software platforms have been used to transform nearly every industry out there. But the construction, renovation and service trades haven’t had a lot of great options.
ServiceTitan (TTAN) is changing that. Plumbing, roofing, HVAC, painting, landscaping, pest control and other trade businesses are increasingly turning to the company to better manage all aspects of their business.
As of the beginning of 2024, the company had 8,000 Active Customers (those with over $10,000 in annualized billings). In the twelve months ending July 31, 2024, the company generated $685 million in revenue and processed $62 billion of Gross Transaction Volume (+23%).
The stock should be trading today after upping the offering price range to 65 to 67, from 52 to 57 previously. That’s one of the biggest increases in pre-IPO pricing we’ve seen in a long time.
Service Titan, which was founded in 2007, is also interesting because it is venture-backed, with names that include Iconiq Growth, Battery Venture, Bessemer Venture Partners and TPG Tech.
According to Avery Marquez of Renaissance Capital, this is a good sign as it could signal potential to unlock the large backlog of venture-backed companies out there.
CoreWeave
One of the biggest names likely to come public in early 2025 is CoreWeave, a cloud computing services company with backing from Nvidia (NVDA).
The company rents Nvidia-chip-equipped computer services to artificial intelligence (AI) app developers. This gives CoreWeave a GPU-as-a-service business model and makes it a competitor to the big cloud computing mega-caps, like Amazon (AMZN) and Google (GOOG) that have begun to build their own AI accelerator chips in order to reduce reliance on Nvidia.
While the direct connection to Nvidia can be seen as a plus, especially given the inside track to source next-generation B200 Blackwell AI chips, it remains to be seen if this narrow band of chip offerings from Nvidia will evolve into a liability.
Analysts point out that Amazon’s AWS has access to a broader menu of chips that can be matched to a variety of applications. Not every application requires the Ferrari of chips.
On the other hand, current demand for advanced AI functions means demand for CoreWeave’s solutions is hot. The Information recently reported that Microsoft (MSFT) is the company’s biggest customer as it tries to meet demand for ChatGPT use cases.
CoreWeave is reportedly on track to generate $2 billion in revenue this year, then quadruple revenue to $8 billion in 2025.
It’s no wonder this is expected to be a major IPO.
The last funding round, from mid-November, gave CoreWeave a $23 billion valuation, up more than 3-times from a year earlier. Investors in that round included Cisco (CSCO), Pure Storage (PSTG) and BlackRock (BLK).
We don’t know when CoreWeave expects to announce a target IPO date. But the company has just hired Morgan Stanley (MS), Goldman (GS) and JP Morgan (JPM), so clearly it’s getting ready.
Seasoned IPOs to Buy Now
If you’d like to know more about which IPOs you should consider buying, when to buy, and why shares should do well, consider a subscription to Cabot Early Opportunities.
We currently have three positions from the IPO class of 2024, all of which are currently showing gains and are buy-rated. We also have a position from the IPO class of 2023 that’s up double digits.
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