Masters Series: Some of the Greatest Tech Companies in History Are About to Go Public

Editor's note: Dozens of new technology companies are set to go public soon...

And investors who buy the right companies at the right time could be sitting on quick gains of 100%, 200%, or more.

In today's Masters Series essay – excerpted from an Exponential Tech Investor special report – editor Jeff Brown shows why the IPO market is like a massive bottleneck... and explains the little-known law that gives him a huge advantage in finding the next Facebook, Google, or Apple, years before it's a household name...

Some of the Greatest Tech Companies in History Are About to Go Public
By Jeff Brown, editor, Exponential Tech Investor

As I explained yesterday, we're seeing a massive backlog in technology companies going public.

Once a company goes public, it is typically under much more scrutiny. It's subject to reporting requirements that can be distracting to a quick-growing business. Hence the desire to delay the IPO process.

This has led to a huge backlog of companies waiting to go public... And some are among the greatest technology companies in history.

Think of it like a massive bottleneck... a dam ready to explode.

VC investors, investment banks, hedge funds, and institutional investors put money into private technology companies for one reason: to make outsized profits. They are willing to be patient... to a point. Eventually, the investors expect more... They demand an exit.

Exits sometimes come in the form of an acquisition by another technology company. But the really massive gains come from taking these companies public via an IPO.

And you have a chance to get in on these next-generation technology stocks ahead of the crowd.

My Exponential Tech Investor subscribers have already had a number of big IPO winners, including gains of 97%, 100%, and 239%.

And these are only the first of many companies that will go public over the next two years. As the "dam breaks," these companies will access the public markets, raise billions of dollars, make fortunes for investors, and replace slow, outdated companies on the S&P 500 index.

Unless you've been part of the senior management team of a private company that has had an IPO, or you're in the world of investment banking helping companies go public, the IPO process is likely a bit of a mystery to you.

It's a well-defined procedure that thousands of companies have followed over the years. But about three years ago, something interesting happened... The process became secretive and much less transparent.

But on April 5, 2012, the "Jumpstart Our Business Startups Act" (JOBS Act – H.R. 3606) was signed into law. Buried within the act in section 106, entitled "other matters," is the following clause:

Any emerging growth company, prior to its initial public offering date, may confidentially submit to the Commission a draft registration statement, for confidential nonpublic review by the staff of the Commission prior to public filing, provided that the initial confidential submission and all amendments thereto shall be publicly filed with the Commission not later than 21 days before the date on which the issuer conducts a road show...

Thanks to this clause, companies can submit confidential IPO filings. This allows them to do a lot of the leg work for going public many months in advance, without making its intentions known to the public.

Being able to file confidentially has significant advantages. The IPO prospectus – known as "S-1 filings" – are very detailed. They provide specific information about the health of the business, strategy, products, revenue, costs, key contracts, etc. If this document is public, it means that the competition will also have access to all of this information. It also means that investment banks will be contacting the company nonstop to sell their services and help the company with the IPO. Keeping the details of the company confidential prevents any competitive disadvantage, as well as unwanted distractions.

The JOBS Act defined an "emerging growth company" as one with annual gross revenues less than $1 billion in its last fiscal year. The vast majority of companies aspiring to go public meet this criterion. And they're taking advantage of it...

By the second year of the JOBS Act, about 87% of all companies filing for IPOs did it confidentially. The Wall Street Journal recently referred to these confidential filings as the "Dark Pipeline."

The ability to fly under the IPO radar might be great for businesses, but it's frustrating for investors and investment banks. They can longer see what companies may be preparing for an IPO.

An S-1 filing used to be the only way investors and investment banks could know which companies were preparing for an IPO. Now that companies have the ability to file their S-1s confidentially, an S-1/A and a road show are the first publicly available signs that going public is imminent.

And when I say "public," I mean public only to those scouring SEC filings and tracking news on any road shows that might be taking place. At best, you might have two or three weeks' notice on whether or not to invest in an IPO. The average investor only becomes aware of these new companies months or years after they have gone public... often missing the largest potential profits.

The only way to know about these opportunities is to do a tremendous amount of research and analysis well in advance.

Over the last five years, I've been studying the most interesting exponential technologies and the key private companies working in that space. This is critical preparation for determining whether or not an IPO will be a worthy investment for us. I've also been looking at each company's sequence of financings, the size of each round, and the actual entities that are making the investments. This kind of information signals whether a company is getting ready to go public.

Time is short once we know a company will begin the IPO process. Those days are spent analyzing any updated information about the company, the S-1 and S-1/A filings, the pricing and valuation of the IPO, and any updates about the products, industry, and competition.

To that end, I have "shortlisted" 20 companies that could IPO within the next 24 months. Many of these companies will make fantastic investment opportunities for my Exponential Tech Investor subscribers.

Some of these companies will likely be acquired before an IPO by larger technology companies. That doesn't necessarily mean that the investment opportunity has been missed. In fact, the acquiring company might become an interesting investment as a result.

Either way, we're preparing to take advantage of these exciting opportunities. This is critical to being a successful small-cap, high-technology investor. The most transformative and disruptive technologies and business models are most often driven by small, secretive, venture-capital-backed companies that almost no one has heard about. And we want to get in on the ground floor of these companies as early as possible.

Regards,

Jeff Brown

Editor's note: Jeff's track record is incredible. Since June, he has booked winners of 239%, 97%, 73%... and 100% in just 27 days. Right now, you can watch a presentation Jeff put together where he reveals the name of a stock that recently went public... and could double or triple in the next 18 months.

Until now, the only way to view this video was to be an Alliance member. But we've made this video – and a special limited-time offer – available to everyone until Monday at midnight. Watch the video here.