The Most Expensive 2016 U.S. IPO And 2017 IPO Outlook

ZTO Express, a Chinese package delivery company, began its first public trading on last week. Shares opened at $18.40, but eased to close the first day of action at $16.57. Several stocks this year have slumped on their initial day of trading amid uncertainties in the global markets with rising political tensions.

But the management of ZTO downplayed the stock’s slump, saying that volatility in newly IPOed stocks is a common occurrence. However, the company hopes to benefit from China’s rapidly growing e-commerce industry. Alibaba, JD.com, Tencent and other players have sparked a boom in China’s online shopping market and delivery services such as ZTO are looking to cash in on the industry’s growth.

The IPO valued ZTO at more than $12 billion, making it the most expensive U.S. IPO so far in 2016. ZTO’s IPO is also the second-largest US IPO of a Chinese company since Alibaba’s 2014 public listing that valued the e-commerce giant at $25 billion.

ZTO sold 72.1 million shares in the IPO, which was initially priced in the range of $16.50 – $18.50, but ended up listing at $19.50 a share. The higher listing price signaled investor appetite for the stock. The company raised $1.4 billion in the IPO. ZTO intends to use close to $720 million of its IPO proceeds to acquire more delivery equipment, including buying of trucks.

Huge growth opportunity for ZTO Express

ZTO gives investors exposure to both China’s consumer and e-commerce markets, which are all booming because of the rising income and rapidly expanding middle class population. China is a larger delivery market than the U.S. In 2015, 20.7 billion parcels were delivered, about 1.5 times the volume delivered in the U.S. in the same period.

China’s underpenetrated e-commerce market indicates a huge growth opportunity ahead for ZTO. The country’s e-commerce market was valued at $609 billion based on gross merchandise volume (GMV) measure. But it is expected to grow to $1.47 trillion by 2020.

Alibaba is responsible for close to 75% of ZTO’s delivery volume. As such, the success of Alibaba is a blessing for ZTO.

Snap nears IPO but the company keeps investors guessing

Snap Inc, the owner of Snapchat also planning for an IPO. In fact, the company has been talking of the need to go public from far back in 2015. But it now seems it nears listing as early the first quarter of 2017. Snap is reportedly seeking to raise $4 billion through its IPO. The company is valued at more than $25 billion. A few years ago Facebook unsuccessfully tried to acquire Snapchat for about $3 billion. The failed takeover of the photo-sharing app led Facebook to instead acquire WhatsApp, paying close to $22 billion for the mobile messaging app.

It has been a difficult time for U.S. IPO market in 2016. Many stocks that have gone public this year have plunged. Additionally, IPO count and valuation have significantly dropped compared to last year. The slow IPO market comes amid political uncertainty as Americans heads to the ballots this month to elect their next president.

Perhaps the challenging IPO market is a reason Snap avoided listing this year. The company could be trying to avoid the ill-fate that Facebook suffered in its 2012 IPO. The first day of trading in shares of the social media giants was hit by glitches, leading the stock to crash.

Besides Snap, other highly anticipated 2017 unicorn IPOs include Uber, valued at $68 billion, Airbnb, valued at more than $25 billion and Dropbox, valued at $10 billion.