Despite the almost constant turmoil caused by the coronavirus pandemic, 2020 will be one of the best years for initial public offerings (IPOs). Over the past 12 months, a staggering 216 companies have gone public, the most since 2014, and the companies have raised a staggering $ 78.1 billion in the process.
In line with previous years, healthcare and technology have been the most popular sectors in the IPO market. Airbnb (ABNB), Doordash (DASH), Snowflake (SNOW), Lufax Holding (LU) and Royalty Pharma (RPRX) were the largest companies to go public this year.
And 2021 looks like it could be just as good for public debuts, according to Kathleen Smith, an IPO ETF manager at Renaissance Capital.
“As long as the market holds, we could see 2021 as a better year than 2020,” Smith told Yahoo Finance. Although the IPO market kicked off strongly in 2020, the pipeline basically closed in March due to a pandemic before picking up steam again in the second half of the year. The momentum looks promising for the new year, assuming that the Federal Reserve’s easy money policy remains intact for the foreseeable future.
Overall, this year’s list of public offerings performed extremely well during and after their IPOs. The Renaissance IPO ETF (IPO) was up 119% this year from an overall S&P gain of 14.3%, recording its best year ever. The average yield on the US IPO this year was 75.4%, compared to last year’s 24.4% and a loss of -1.9% in 2018.
With the two COVID-19 vaccines now approved in the U.S., one potential shift is a so-called return to normal that may not favor growth-oriented health and technology companies, but may instead benefit from cyclical names that aren’t as fast. “We cannot be so sure that technology IPOs will be at the top of the list in 2021. “As soon as any concerns arise, the markets are corrected and more conservative prices are offered and they do not end,” Smith said.
The big companies from 2021 range from communication services and consumer discretion to fintech and materials. Juggernauts like the gambling platform Roblox, the retailer Affirm, which is paid later, and the chemical and equipment company Atotech are ready to raise as much as a billion dollars. And there are a lot of other companies waiting on the wings.
If you have kids, you know Roblox. The online gaming platform, valued at $ 4 billion, allows users to create and publish their own video games using Roblox’s toolkit. It’s a parts creation, a work play, and is expected to hit the public market next year. Founded in 2004 by David Baszucki and Erik Cassel, the company makes money by selling its Robux currency in the game.
Roblox’s S-1 indicates that the company, along with the rest of the gaming industry, has experienced rapid growth in users and revenue, but its losses have increased.
In the nine-month period ending in September, Roblox had 31.1 million active users per day, an increase of 82% over the same period a year ago. Revenue reached $ 589 million, but net losses were $ 203 million, four and a half times the $ 46 million it lost in the same period in 2019.
Roblox, which was expected to premiere in December, delayed its transition to public markets after Doordash and Airbnb made it difficult for video game companies to price their shares, according to The Wall Street Journal.
Smith says the firm should see huge investor interest.
“I look at Roblox and, even though they’re losing money, they have a positive cash flow and it’s an IPO plus a billion dollars, so I think investors will pay attention to that,” Smith said.
Confirm holding (AFRM)
Affirm Holdings, like Roblox, was expected to enter an IPO in December 2020. However, it postponed the move until at least January 2021 after Doordash and Airbnb saw massive jumps during their public offerings.
The company, valued at $ 10 billion, is part of an increasing number of services that are bought and paid for, and offer 0% loans or simple interest rates to consumers who want to buy everything from exercise shoes to exercise bikes.
Founded in 2012, the company continues to lose money, making net losses of $ 120.5 million and $ 112.6 million, respectively, in 2019 and 2020, according to its S-1. Still, Affirm, founded by Paypal co-founder Max Levchin, is likely to see his IPO raise billions of dollars.
“The company is losing money and I think that although it is growing very fast, these types of companies are like lenders until the day of payment,” Smith said. “They have some things that investors need to pay attention to when it comes to rules and regulations.”
Originally expected to be an IPO in the first half of 2020, Atotech, owned by the Carlyle Group, has postponed its performance due to a coronavirus pandemic and fears it could harm its assessment. The company produces specialty chemicals and equipment found in everything from smartphones to communications infrastructure.
The German firm filed its F-1 with the Securities and Exchange Commission in January 2020, reporting consolidated net losses of $ 23.7 million in 2018 to $ 1.2 billion in revenue. In the nine months ended September 2019, the firm generated net revenue of $ 12 million with revenue of $ 877 million, and its IPO contract could reach $ 1 billion.
Of course, the company will also have to contend with variables in the broader technology industry, including the whims of consumers and businesses, buying cycles for electronic infrastructure.
Pets go there, and in 2021, investors. Pet retail giant Petco should hit the market in 2021 with a contract worth as much as $ 800 million. Founded in 1965, the company was last traded in 2006 and has been owned by private equity investors ever since.
At S-1, CEO Ron Coughlin goes even further, saying: “Petco has grown from a local veterinary supply store to a disruptive, fully integrated, digital, comprehensive pet care eco-system that puts pet health and well-being first. . . ”
It’s a classy way to say that you can get almost anything your pet needs from a dealer. And judging by the stellar performance of online pet retailer Chewy (CHWY) since its release in June 2019 – 107% – Petco thinks the demand for pet products will only grow.
The company, which will be wonderfully listed as WOOF, has seen its profitability improve since the late days. Net losses in 2018 amounted to 413 million dollars, but fell to 103 million in 2019. Net sales in the same period increased from 4.39 billion in 2018 to 4.43 billion in 2019.
Southeast Grocery Stores (SEGR)
Southeastern Grocers, which operates 420 supermarkets under the names Winn-Dixie, Harveys and Fresco y Más, is an interesting addition to this list as it came out of bankruptcy only in May 2018. In its S-1 the company states its overall financial performance has been hampered by an aggressive expansion of 2011 to 2015, which recorded an increase in the trade base by 256%.
Since then, its profitability has improved with the company reporting a net loss of $ 62 million in the 28 weeks ended July 10, 2018, to turn that into net income of $ 205 million in the 28 weeks ended July 8. 2020.
Now a younger organization, Southeastern Grocers, is seeking an IPO in 2021 and could raise as much as $ 500 million.
Although many of these companies are trying to reach public exchanges in the traditional way, 2020 was a banner for alternative ways of entering the market – namely, SPAC (a special purpose vehicle). Two hundred and forty-one SPAC raised $ 73.4 billion. Although household names are likely to continue the traditional IPO or even direct listing, those looking for a faster liquidity option will consider these so-called companies with a blank check to make them public.
Investors should expect alternative ways to enter the market to remain prominent in 2021. “Private companies like Paysafe and Opendoor have taken advantage of the speed and security of price that the SPAC structure offers during an uncertain market. Companies now have more options than ever when they conduct public listing with SPACs and direct listing, and both appear as ‘major‘ options ’, according to the EquityZen market before the IPO.
In addition to the aforementioned five, which will almost certainly go public in 2021, there are many other expected debuts of companies that have become household names. The Stripe payment platform, the launch of the Instacart grocery store, the Robinhood Markets stock trading app, the Compass housing brokerage house, the Bumble dating app, the Coursera online education platform and fashion players ThredUp and Poshmark are preparing their market debut.
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Dan Howley is a technical editor based in New York. Melody Hahm is a West Coast correspondent from Los Angeles.
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