What are the biggest IPOs of 2023? It’s been a very slow year for IPOs. In 2020 and 2021, there were 480 and 1035 IPOs, which both broke records. Very few of them have been successful since. In 2021, Rivian (down 83%), Lucid Motors (down 47%), Grab (down 70%), SoFi (down 23%) and Bumble (down 80%) were some of the biggest companies to go public, and neither of them have been successful on the stock market since. For this reason, many companies have abstained from going public in the tech industry because of uncertain market conditions. In September 2023, Arm Holdings, Instacart, and Klaviyo made stock market debuts less than one week apart. Were they successful, or did they run into some trouble? Let’s find out.
Biggest IPOs of 2023: Arm Holdings (NASDAQ: ARM)
Arm Holdings is a British semiconductor company owned by Japanese bank SoftBank, which owns around 90% of the company. The company went public on September 14th, and its IPO was worth $54.5B, making it the largest IPO since truck maker Rivian went public in 2021.
Arm Holdings generates revenue from producing and designing chips and licensing its products to customers. When we look at the company’s revenue, 63% comes from royalties from licensing their chips.
You’re right if you’ve noticed a few red flags so far. The majority owner, SoftBank (also the owner of WeWork), may be selling this stock to get rid of it eventually. Let’s find out why they could be one of the biggest IPOs of 2023.
Is Arm Holdings a Good Investment?
Arm Holdings had a successful stock market debut, but the stock quickly fell in the following days with five consecutive red days. What might be the reasons behind this price movement? Despite being one of the biggest IPOs of 2023, Arm Holdings may encounter some difficulties.
Valuation
The first issue is with the valuation. The IPO was priced at 100 times earnings and 20 times sales, an exclusive club for high-growth companies. In the semiconductor industry, it’s priced similarly to Nvidia (one of Arm’s customers), which is expecting triple-digit growth. Arm Holding’s growth has averaged only 15% in the last three years, and in 2022 it declined.
Market Conditions
At the moment, Arm is one of the leaders in smartphone and PC processors, but the competitors are gaining some ground quickly. Its market share is almost 100% in the smartphone industry alone, with no room to grow. Arm’s chipmaker competitors created a joint venture to close the performance gap and steal a large market share.
China
Like many other chipmakers, Arm is having some issues with China. 25% of its business comes from its Chinese subsidiary, Arm China (I can feel a pun brewing here somewhere). Arm has had issues with its subsidiary, and with China-US tensions heating up, there is a lot of uncertainty surrounding the company.
In short, Arm may be the biggest IPOs of 2023, but there is too much pessimism around its business. I wouldn’t be surprised if the chipmaker’s stock price bleeds and its market share decreases in the upcoming quarters. Arm Holdings isn’t the only company to go public in September 2023, let’s look at the other ones.
Biggest IPOs of 2023: Instacart (NASDAQ: CART)
Instacart has been around for over a decade, helping Americans and Canadians with deliveries in more than 14,000 cities. Costco, Kroger, Walgreens, Safeway, and 80,000 other stores are among its partners.
Instacart is a personal shopper for over 7.7M active users who spend over $300 monthly. During the pandemic, Instacart’s services were in high demand. It’s not a surprise that its valuation was almost $40B. However, today is a different world, and its IPO was only worth $9.9B. What does that mean for one of the biggest IPOs in 2023?
Is Instacart a Good Investment?
Unlike Arm Holdings, Instacart is a market leader in an industry with plenty of upside. Since the pandemic, an increasing number of customers are ordering their groceries online (12%). That number is way below electronics (66%) and apparel (38%) and has plenty of room to grow. I always thought I’d prefer shopping in person, but with time, I understood the practicality of shopping online, and millions share this feeling.
Revenue
Instacart’s revenue doesn’t only come from groceries. The company developed Instacart Ads. Brands can advertise on its marketplace. When the customer is ordering, those feature ads show up. In 2022, this business segment accounted for 30% of its revenue, with PepsiCo being one of its main customers.
Speaking of which, Instacart’s revenue has been growing steadily YoY. Since more than doubling between 2019 and 2020, it has slowed down since but is still seeing growth of 20-30%. In 2022, the company was profitable ($428M). Users, revenues, and partners are increasing, but how will the stock fare?
After a successful day one on the stock market, Instacart’s stock returned to earth at around $30. It may be too early to predict where the stock will go, but the market conditions seem much more favorable for Instacart than for Arm Holdings.
I wouldn’t be surprised if Instacart keeps diversifying its revenue streams and gains popularity in North America. See you with an update on one of the biggest IPOs of 2023 in a few quarters!
Klaviyo (NYE: KVYO)
Klaviyo is a global tech company that provides an AI-integrated marketing automation platform. Companies can personalize the platform to their needs, and it helps them understand their clients. The company went public one day after Instacart with a similar valuation of $9.2B. Back in 2021, it was valued at $9.5B. Shopify is one of its principal investors, with an 11% stake.
There is much less information about Klaviyo than its IPO peers. It’s hard to say where the company is heading on the stock market. However, its revenue has been increasing, and last year it was profitable. Klaviyo is looking to help its customers while expanding into new markets.
Between Arm Holdings, Instacart, and Klaviyo, Arm Holdings is by far the biggest IPOs of 2023 due to its valuation and since it is a semiconductor stock. All three are considered tech stocks and among the first companies to go public in the last 24 months from this sector. In my personal opinion, Instacart seems to be the one with the most upside. We’ll see in a few months which one has had the most success on the stock market.
Biggest IPOs of 2023 Final Take
To conclude, September 2023 is a very important month for the IPO market. Three tech companies from different markets went public, making them the biggest IPOs of 2023. If they are successful, it might entice other companies to follow their path. However, if their stock price declines, we might have to wait another year for the IPO market to get hot.
After all, there is a reason why recent IPOs haven’t performed well and that most investors are staying away from them. In today’s market conditions, it takes more than profit and revenue growth to attract new investors.
