Which Massive Growth Private Companies Are the Next Hot IPOs?

Inc. has released its 2013 Inc. 5000 List, which is quite simply the fastest growing private companies that it can track in America. It is a massive list, and the effort must be a huge undertaking by more than a few hard-working people. As most investors know, it is fast growth private companies that are often the hot initial public offerings (IPOs) of tomorrow.

Each year 24/7 Wall St. previews what it thinks will be the next hot IPOs and before the end of what we consider the summer season (up to Labor Day). We wanted to preview the companies on the Inc. 5000 List to see which companies could be the hot IPOs of 2013 and even 2014. We have also included some IPO filings and likely IPOs that were not on the list. We noticed that making the Inc. 5000 List requires a company to apply to be included.

Before you consider this just to be a bit of IPO pondering, take a step back and understand that some of this list membership already has filed to come public or actually has made it public recently. Boise Cascade Co. (NYSE: BCC), CDW Corp. (NASDAQ: CDW), Coty Inc. (NYSE: COTY), Global Brass and Copper Holdings Inc. (NYSE: BRSS), Noodles & Company (NASDAQ: NDLS), Restoration Hardware Holdings Inc. (NYSE: RH), Sprouts Farmers Market Inc. (NASDAQ: SFM) and many others are on the list and have made it to the post-IPO stage in the stock market.

Then there are the other big companies that will come public that are not on the Inc. 5000 List. One warning, and admission, is that picking any list of future IPOs is very subjective. It is also a situation that can change literally on a dime.

It is a mystery as to has not ever gone public. At one point it was supposed to hold an IPO, but that effort was withdrawn. It has seen 49% growth in the past three years to $910.9 million and was listed as having 3,369 employees. Of the 5,000 on the Inc. list, Godaddy was ranked #4,532 but was in the top 30 by total sales. With a recent acquisition, maybe things will point toward an IPO again.

Kum & Go could be next on the proposed IPO list because its co-founder recently passed away at the young age of 78 years. This company is a leading convenience store chain that dates all the way back to 1959 and now has roughly 420 stores across eleven states. We do not want to press an issue, but frequently IPOs come in the months or years after the death of a founder. One hurdle that may be a problem for some future shareholders is that Kum & Go says that it donates 10% of its profits back to charities and local communities.

Living Social is ranked as number 16 of the 5,000 and that is very high. Sales growth was listed as 12,333%, with sales now at $536 million. It was also listed as having 4,100 employees, and we would bet that there are more than just a few of those workers with stock options who would like to become instant millionaires. Rival Groupon Inc. (NASDAQ: GRPN) may be a part of the problem, because its IPO was not well received and the business of “daily deals” is not turning out to be quite as much “social media” as it is online couponing.

Another big growth name on the list was Fuhu, which makes tablets for children. Sales growth in a three-year period was 42,000% to almost $118 million. We will leave the rest of the massive list’s potential IPO filings up to the companies themselves.

Here are great growth or large companies that are not on the Inc. 5000 List but that will be watched closely:

Chegg Inc. has recently filed. It was not on the Inc. 5000 List that we saw, but it is the leader and a potential revolutionizing agent of school textbooks. Its rental business has grown rapidly and it claims that it can handle about 90% of its requests when in the target market.

Re/Max, the real estate agency, filed just in August to come public. It is a name you know well if you have been in the housing market any time in the past couple of decades. We detailed this one in full, with the supposition that its success will depend on housing sales for the rest of 2013.

Twitter is another social media, or emerging news player, that we expect will come public within the first half of 2014. Until we see financials and filings, we cannot comment on its finances other than to be the one-millionth place to say how much Twitter is changing (maybe not for the better) the media industry around breaking news.

Two other IPO filings will be key to watch as well. One is called Antero Resources Corp., which is an independent oil and gas player in the Appalachian Basin. The size of the filing was what drives the interest here because it was for up to $1 billion. The second, and even more important, will be the Hilton IPO which was filed for at the start of August. This was close to a $27 billion acquisition back in the private equity boom and one of the biggest deals ever, so all eyes will be watching very closely here.

As a reminder, BDO recently projected that the IPO market would pick up during the rest of 2013. Now it is time to prove whether the projection is true. We would caution investors that some scheduled IPOs simply do not come about, and maybe for reasons you might not guess or ever find out about. That is the game, and of course market conditions dictate the IPO flow perhaps more than anything.

Stay tuned.

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