The IPO market was challenged by 2023. Last year, there were 154 IPOs on the US stock market, which is 15% lower than in 2022. Both younger and more mature companies delayed their IPO because of the geopolitics and continuous pandemic outcomes. However, the “IPO drought” can finally come to an end in 2024. And Reddit’s IPO this year is one of the examples. 

Let’s have a look at three noteworthy companies I believe every institutional investor should watch out for this year in anticipation of major initial public offering events. 

SpaceX and Starlink: Shaping the Investment Narrative of the Year

This list could be easily finished by this single company. SpaceX is definitely considered the most attractive private company for investors in terms of potential IPO. Throughout its years in business, SpaceX has bet on several key products to penetrate the market. First, it was the ambitious Mars colonization program and a target of a million people on Mars by 2050. Elon Musk, CEO of SpaceX, initially intended to fund this expensive space mission by divesting his Tesla Motors business. However, a lack of transparency among Tesla's executives and its inability to conquer European and Asian markets prompted a shift in Musk's strategy.

Later on, SpaceX focused on the idea of a revenue boost by providing commercial cargo services for space stations. While achieving historic milestones in the space market as the first private company in several niches, its business model proved to be unfit for the evolving reality. Despite the space market expanding to approximately $447 billion over a decade (up from $280 billion in 2010), the leading developing space nations like India, Japan, and China decided to pass on the SpaceX provider services to make it on their own.

Today, Starlink has taken center stage as the main commercial product of SpaceX, presenting a global satellite internet constellation. The narrative suggests an impending surge in investor interest as we progress through the year. I predict an active investor engagement with Starlink in 2024, with an anticipated IPO slated for 2025. The stocks will likely be offered not as part of a conventional IPO but as part of a pre-IPO, with investment funds already in the queue. I believe that this summer, the company shares will find their way into the portfolios of investors prior to the official IPO.

Notably, Elon Musk, in outlining his vision years ago, expressed the intention to list Starlink "several years in the future when revenue growth is smooth and predictable." In 2022, Starlink has reported a substantial $1.4 billion in revenue, breaking even and projecting an ascent to around $15 billion in 2024. With this performance, Starlink undeniably emerges as the most intriguing investment event of the year.

Reddit: A Top US Social Media Went Public. And How?

The next company on the list is well-beloved (and hated) among the political elites. Prior to Covid-19, when the interest rates in the US were relatively low, we could observe a surge in IPOs. Following this trend, Reddit, an American forum and social network, first applied for an IPO in 2021. However, the pandemic significantly changed the financial landscape, and many companies, including Reddit, delayed their IPO plans out of fear of failing to attract sufficient investments.

Fast-forward three years, Reddit has become a public company on March 21st and the first major social media site to launch an IPO since Pinterest back in 2019. Reddit got listed on New York Stock exchange and raised $229 million for existing shareholders and $519 million for Reddit. So in total $748 million. 

Against this backdrop, Reddit finds itself at the zenith of its popularity, with its active monthly audience soaring by approximately 40% from 2021 to 2023. The scrutiny on TikTok is poised to further sway investor interest toward Reddit, positioning it as a top competitor in the social network arena.

Reddit has always been central to political discussions as a top US social network. Since it was criticized for opportunistic views, the company will likely take a more ethical stand due to the SEC's scrupulous supervision. This fact explains the high interest in Reddit’s offering among institutional investors.

Stripe: A Payment Giant to Set a Precedent

“The payment system on the list, seriously,” you may ask. Such skepticism surrounding the fintech industry and its participants has been evident in recent years. Investors, in particular, have reservations about venturing into the fintech market too late. Yet, let me challenge this notion.

At 14 years old, Stripe stands as a fintech giant, handling a staggering $1 trillion in payments in 2023. The company raised a $6.5 billion funding round last year, and its current value is at $50 billion. Notably, September 2023 marked the strategic appointment of seasoned CFO Steffan Tomlinson, renowned for guiding Confluent and Palo Alto Networks through successful public offerings.

I personally consider Stripe's potential IPO as a strong signal reverberating across the entire industry. In the case of Stripe’s successful public offering event, other major fintech players may follow. Should Stripe articulate a compelling narrative of its market penetration into LATAM, APAC, and other key regions, positioning itself for an IPO, it could mark a momentum for the industry. The success of Stripe's IPO might well become the touchstone dictating the trajectory of the payments segment in the foreseeable future.

As we anticipate and predict these major IPO events, I personally find it especially important for institutional investors to closely watch out for pre-IPO opportunities to secure a stake in these promising companies.