Unicorns – private companies valued at more than $1 billion – went public in 2019 at the same pace as in 2018, but their combined offering size of $18.9 billion more than tripled the value of 2018’s offerings, according to a new report released today by compliance research firm, Intelligize. The report, Analysis of 2019 Unicorn IPOs, which follows last year’s inaugural unicorn IPO study, examines the activities of high-profile unicorns that debuted in 2019, including Uber, Beyond Meat and Peloton.
The Intelligize report examines offering trends, as well as Environmental, Social and Governance factors, and accounting issues faced by the 22 unicorn IPOs from 2019 (along with Slack, which undertook a massive direct listing). Among the report’s highlights is an analysis of the all-star outlier of the 2019 unicorn IPO class, Beyond Meat. The company took its time after filing a draft registration statement (DRS), strategically building its value. After launching its IPO on May 1, 2019, its share price soared 163% by the end of its first day of trading to become the best-performing public offering by a major U.S. company in almost two decades.
“Unicorn IPOs reached new heights during the first half of 2019, particularly in the second quarter, which saw 10 IPOs with a combined offering size of $12.5 billion, nearly double the $5.8 billion for all of 2018,” said Rob Peters, a senior director at Intelligize and one of the report’s co-authors. “That pace, though, was not sustainable. After lackluster debuts by several unicorns, including Lyft and Uber, IPO activity slowed in Q3, which ended with WeWork’s shocking abandonment of its IPO. This may have made additional lurking unicorns a bit skittish about their own plans.”
The Intelligize report also revealed that the average underwriting, legal and audit fees paid by unicorns fell to 3.91% in 2019, nearly half the 7.56% paid by 2018 unicorns. High-profile IPOs by Lyft and Uber were primarily responsible for the drop, as firms sweetened their terms to win the business of the two unicorns behind the most hotly anticipated IPOs of 2019.
The report further notes that, as in 2018, the governance structures of the 2019 class of unicorn IPOs continued to be out of step with the broader market.
“As we noted in last year’s report, unicorns, true to their startup roots, typically concentrate power in the hands of charismatic CEO-founders,” said Peters. “Forty-five percent of 2019 unicorns had high-vote shares. The WeWork debacle brought the debate over multi-class share and other unicorn governance structures to the fore, and this dialogue has continued, most notably with Airbnb signaling a stakeholder-centric approach to governance in an attempt to avoid the scrutiny that befell WeWork.”
As the Securities and Exchange Commission (SEC) went through the review and comment process with unicorns conducting IPOs in 2019, it focused on several different accounting topics, most notably revenue recognition (with 10 issuers receiving comments). As with the 2018 class of unicorns, the majority of those going public in 2019 took advantage of the reduced reporting requirements and exemption from new accounting standards for Emerging Growth Companies (EGCs).
Throughout the run-up to its failed IPO, WeWork fielded questions from the SEC about its use of non-GAAP numbers. It used six different non-GAAP metrics, including one – “community-adjusted EBITDA” – that became something of a punchline. No other unicorns have been so mocked for coloring outside the GAAP lines, but other unicorns, including Uber, also have found their non-GAAP metrics drawing scrutiny from the SEC.
Analysis of 2019 Unicorn IPOs is based on information contained in the Intelligize platform as of January 20, 2020.
There is no one universally accepted definition of a “unicorn” company. This means that research produced on the topic is often inconsistent based on the criteria used to classify a unicorn. For the purposes of this report, a unicorn is defined as a company:
- That is valued at $1 billion or greater at the time of IPO
- That is venture-capital backed
- That is listing common stock or a class of common stock (not ADRs)
- That is listing on the NYSE or Nasdaq, with more than 50 percent of outstanding voting securities held by U.S. residents
- That had a registration effective from January 1, 2016 through December 31, 2019
Intelligize is the leading provider of best-in-class content, exclusive news collections, regulatory insights, and powerful analytical tools for compliance and transactional professionals. Intelligize offers a web-based research platform that ensures law firms, accounting firms, corporations and other organizations stay compliant with government regulations, build stronger deals and agreements, and deliver value to their shareholders and clients. Headquartered in the Washington, DC metro area, Intelligize serves Fortune 500 companies, including Starbucks, IBM, Microsoft, Verizon and Walmart, as well as many of the top global law and accounting firms. In 2016, Intelligize became a wholly-owned subsidiary of LexisNexis®, a leading global provider of content-enabled workflow solutions designed specifically for professionals in the legal, risk management, corporate, government, law enforcement, accounting and academic markets. For more information, visit www.intelligize.com.