Top tech bankers say this year's IPO flops don't spell doom for the entire market, and enterprise software companies are lining up for 2020 debuts

Reuters

Traders and company executives gather for the Uber Technologies Inc. IPO on the trading floor of the NYSE in New York.

• Two top tech bankers said they're expecting a healthy IPO market next year, even after a string of disappointing public debuts from companies like Uber and SmileDirectClub.
• "One company struggling or one investor making difficult investments doesn't spell doom for the entire market," said Goldman Sachs's Nick Giovanni.
• CB Insights highlighted the five companies most likely to go public next year: development platform GitLab, cloud data warehouse Snowflake, personal finance platform Credit Karma, game engine Unity, and construction management software Procore.
• For more BI Prime stories, click here.

A string of disappointing initial public offerings this year hasn't dented Nick Giovanni's outlook for 2020.

"We're very optimistic there will be a very healthy IPO market next year," the co-head of Goldman Sachs' global technology, media, and telecom group told Business Insider.

Even on the heels of some companies, like Uber and SmileDirect Club, that have performed poorly post-IPO, Giovanni said there are still more consumer and internet companies readying their offerings for 2020. He said even more names in the software space will IPO.

"One company struggling or one investor making difficult investments doesn't spell doom for the entire market," he said. "In late-cycle private financings you often see structures with downside protection for investors, and you're starting to see that. You're also seeing many companies with no problem raising money from great investors. It's tough to generalize what's happening with one company as a read across to other companies."

In a report last week, CB Insights identified the five companies most likely to IPO next year: software-development platform GitLab - whose CEO told Business Insider earlier this month he's shooting for a November IPO- along with cloud data warehouse Snowflake, personal finance platform Credit Karma, game engine Unity, and construction management software Procore.

Other companies in CB Insights' IPO pipeline include Asana, Squarespace, DoorDash, and Airbnb.

Greg Chamberlain, JPMorgan's head of US technology, media, and telecoms equity capital markets, said there's not one standout tech sector set to see more or less activity in 2020 IPOs.

"It feels like we're going to have a good level of activity spread across quite a range of tech subsectors," Chamberlain said. "Similar to this year, this includes enterprise software, which continues to be a strong part of the tech IPO landscape."

Despite both the disappointing public markets performances of some of this year's tech debuts, along with WeWork's failed IPO - one of the companies Goldman and JPMorgan worked with - Chamberlain said JPMorgan's internal valuation process hasn't changed.

"Markets will always go up and down," he said. "We continue with the process we have around matching what we think of as the right quality investors with the right companies."

Most of the companies eyeing a 2020 IPO will likely go public in the first half of the year because the US election could cause even more market turmoil than normal, Chamberlain and Giovanni said. And many of the companies are mulling a direct listing instead of a traditional IPO, the bankers said.

Read more: Bill.com surged 60% in its first day of trading. We talked to its CEO and a big backer about the fintech unicorn's IPO and why it's good to be boring post-WeWork.

Read more: SoftBank-backed insurance startup Lemonade has postponed IPO plans after plotting an offering for this year. It shows how the pipeline for high-growth tech is getting clogged after WeWork.

Read more: SmileDirectClub's IPO was such a disaster that the CEO called up JPMorgan's Jamie Dimon to ask what went wrong

Read more: This year's unicorn IPO flops exposed a culture clash between private and public markets, and a top tech banker warns that the growth-at-all-costs mentality won't cut it anymore

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