By Matein Khalid: Chief Investment Officer and Partner at Asas Capital
I call 2020 my autumn of destiny because four of the world’s top software/fintech will go public in IPOs in Hong Kong or New York. Each of these IPOs will be fabulously profitable for investors who are able to get allocations in these deals. The Fab Four IPOs in my autumn of destiny are Ant Financial in Hong Kong, Snowflake, Asana, and Airbnb in New York.
Despite my skepticism about chopstick capitalism, the $30 billion Ant Financial IPO on the Hong Kong Stock Exchange is too yummy to ignore. This will be the world’s largest IPO on October 15th on the Hong Kong Stock Exchange, larger than even Saudi Aramco’s offering in Riyadh last year. I hear the IPO will be priced at a valuation of $230 to $250 billion and I would not be surprised to see Ant Financial trade up to $300 billion in its first five hours as a public company. The grapevine in Hong Kong tells me that this IPO will be oversubscribed by at least five to six times and allocations are white-hot.
This is the world’s biggest fintech deal and fastest-growing digital financial conglomerate with a 30 to 35% bottom-line CAGR. The Alipay super app is the global money-making engine with 700 million monthly users and 80 million enterprise clients in the Middle Kingdom. This monster IPO is blessed by Beijing’s Politburo and thus enjoys Master Confucius’s mandate of heaven. So the CIO of every major pension fund and overseas Chinese family office in Asia will gladly turn cartwheels to accumulate the shares before the IPO.
Alibaba is the founding shareholder with a 33% stake along with Temasek, General Atlantic, Warburg Pincus, and Baillie Gifford. This deal was best bought in the pre-IPO market last summer at a $150 billion valuation but IPO filing has given a steroid shot to the offer price. Yet a $230 billion valuation meets my risk-reward calculus for one of the world’s true growth technology IPOs. Alipay processed $17 trillion in payments in China alone, way beyond Visa’s $8.8 trillion. This puppy is a must-own for every GCC smart money investor.
Cloud data warehousing firm Snowflake finally goes public in New York under the symbol SNOW. This is the software industry’s hottest and biggest IPO of 2020 and will easily achieve a $40 billion market cap on the NYSE. With Goldman, Morgan Stanley, and twenty of Wall Street’s crème de la crème investment banks as underwriters as well as Salesforce.com and Berkshire Hathaway as anchor investors, I expect a feeding frenzy for the shares at/after the IPO.
With revenue growth above 100% in a sizzler $80 billion cloud warehousing software segment, I would ideally buy Snowflake on the NYSE at $22 to $24 billion valuation where the odds of a double bagger profit are almost certain. Mark my words, Snowflake is another Datadog/CrowdStrike scale fairytale IPO in software. The IPO is covered at least ten times. Snowflake will be the mother of all slam-dunk tech IPO deals in this autumn of stock market destiny.
Airbnb has filed for an IPO with the SEC and will go public in late September. The global home-sharing platform was slammed 60% after the COVID-19 pandemic gutted cross border travel and tourism. The Silverlake, a top Silicon Valley venture capital firm, led a $1 billion convertible debt stake with equity warrants into Airbnb in April at an $18 billion valuation. But that was then and this is now. Airbnb bookings have recovered to 1 million bookings last month. Operating margins were boosted by layoffs and a fall in media spend without any damage to the brand. The shares are trading in the pre-IPO market at $102 to $103. CNBC’s Mad Money guru Jim Cramer calls Airbnb the steel of the century at its current valuation, I absolutely agree though we are only in 2020 and the century has 80 long years left to go.
I will not be surprised if Airbnb trades at $140 to $150 after its IPO. If ever there was an opportunity to invest in a global property tech colossus at a discounted valuation, this is it!
Last but not least is Facebook co-founder Dustin Moskovitz’s Asana (SANA) IPO, whose software helps workers to collaborate and communicate across projects avoiding long email chains. The deal is led by the House of Jamie, the former J.P. Morgan and Morgan Stanley. Its subscription model boasts 1.2 million users and a 120% retention rate. Revenue growth and gross margin are 85% plus.
Watch out for the Palantir direct listing IPO, this deal can well flop. Revenue growth is mediocre in the last five years, even though it is priced at $18 billion now. The exposure to government, oil and gas and financials makes it a classic pandemic victim. The chairman and CEO have been major sellers of the shares. There are many, many trapped longs itching to sell.