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Tech floats to create record $138bn bonanza and thousands of new millionaires, experts claim

Uber's public listing on Friday performed worse than expected
Uber’s public listing on Friday performed worse than expected CREDIT: AP 

Uber’s market debut on Friday means that 2019 is already the biggest year on record for American tech floats, creating an unprecedented amount of new wealth for their early investors, according to research.

A report from the market analysis firm CB Insights put the total “exit value” of this year’s US floats at $130bn (£105bn), narrowly beating the current record of $129bn in 2012, which was mainly driven by Facebook’s $104bn public offering

Around $80bn of that came from Uber, the taxi-hailing company that went public with great fanfare on Friday, and the total could rise even higher if other tech “unicorns” such as WeWork and Slack choose to follow suit.

The result has been an enormous payday for founders such as Travis Kalanick, Uber’s disgraced former chief executive, whose shares in Uber were worth more than $5bn after the listing, and for big investors such as Softbank, whose shares were worth over $11bn.

But the report also found that this money is being spread among far fewer companies than it was in 2012, illustrating how much longer tech firms are staying in the shelter of private markets and how much more their coffers are swelling before they leave.

Arieh Levi, a senior analyst at CB insights, said 2019 had would be the biggest year on record for public floats – “bigger even than the dotcom bubble”. 

“Venture-backed tech companies are staying private longer, and now it seems to be a rush for the exits,” he said. “The question is whether or not these companies can maintain these valuations in the public markets, and how investors will respond to business models that don’t show clear signs of profitability.”

The report combines the market capitalisation of each US tech firm at the time of its initial public offering, even if its shares subsequently fell. Apart from Uber, it counted the rival taxi-hailing company Lyft, the videoconferencing firm Zoom and the cloud service provider PagerDuty.

If WeWork, a co-working company, and Slack, a business messaging service, were to also go public this year at their most recent valuations, that would drive the total value of US tech floats up to $192bn.

Deniz Kahramaner, a real estate agent in the San Francisco Bay area, estimates that such floats will create 5,000 new millionaires, far surpassing the 1,000 minted by Google’s debut in 2004 and dumping enormous amounts of money into the city’s housing markets once employees’ six-month lock-up agreements have expired. 

Mr Kalanick has been the biggest among the biggest individual beneficiaries, but his co-founder Garret Camp’s shares were worth $4.1bn after the listing, while Uber’s employees together made an estimated $31.5bn.

That beat the payday for John Zimmer, co-founder and president of Lyft, who now owns shares worth around $318m after his company’s bungled listing in March. In both cases, individuals’ gains were dwarfed by those of big investors such as SoftBank, the Saudi Arabian public investment fund (whose Uber shares were worth $3.7bn and the Japanese e-commerce giant Rakuten, whose shares in Lyft are now worth $1.3bn.

Mr Levi said a combination of low interest rates and hype over disruptive new technologies had created a scramble for private investment opportunities, meaning tech firms can afford to stay private for far longer and go public and higher market capitalisations.

In 2012, the average “exit value” was $4.3bn, whereas in 2019 it is predicted to be $9.6bn. That is in part because fewer companies are going public in the first place: at their current pace, only 15 US tech firms will do so this year, compared to a peak of 33 in 2014. 

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