These IPOs will be hot in 2021
Here are the market launches poised to make a splash.
Companies looking to go public in 2021 will face shifts in the economic and political climate, starting in January, when the country ushers in the Biden administration, a Democratic-controlled Congress and widespread COVID vaccinations. It takes place against the backdrop of continued low interest rates, a strong stock market and buyers awash in cash, though a slow job recovery.
What’s ahead in 2021?
The IPO market saw a slow start to 2021. Many listings scheduled for the first quarter were delayed due to soft market conditions exaggerated by COVID-related uncertainties and the start of the new presidential administration.
“I think in 2021 there will be a continuation in the trend of an increase in IPOs, while M&A which began to return in September 2020 is back, and we expect that to continue into 2021,” said Manolo Falcó, co-head of banking, capital markets and advisory at Citigroup, in a December 2020 MarketWatch interview.
Companies slated to go public in 2021
Here are 11 companies planning to go public in 2021 based on initial SEC filings.
Supporting 100 million users in 2020, Bumble offers dating through Bumble Date, a search for friends through Bumble BFF and a LinkedIn-like networking system called Bumble Biz. The social networking app relies on advertising and premium subscriptions to turn a profit. Bumble went public in February, raising $2.15 billion after selling 50 million shares at $43 apiece. The offering brought Bumble’s market cap to $7.7 billion.
ThoughtSpot offers cloud computing services to businesses with a need for highly scaled infrastructure software. An IPO is expected in the fall of 2021, though the company has not filed a viewable Form S-1 with the SEC.
Cats may have nine lives, but pet retailer Petco has four. That’s because 2021 is the fourth time this pet products and services company has gone public since 1994. They did so to raise additional cash for expansion and operations.
With an estimated IPO valuation of $6 billion, Petco sells its pet-related products in more than 1,500 locations in the US, Mexico and Puerto Rico. The company wrapped its IPO on January 13 and is listed on the Nasdaq under the ticker symbol “WOOF.”
UiPath is a robotic platform automation company focused on automating repetitive business tasks and processes that can be handled cheaper and better by robots. It has an estimated IPO valuation of more than $35 billion, and its IPO is expected in the first half of 2021. The company filed a Form S-1 with the US Securities and Exchange Commission on March 26.
Embracing high-end digital technology, this insurance company has raised over $1.5 billion since its founding. This capital helped Oscar develop insurance products for families, small businesses, people enrolled in Medicare Advantage plans and those using telemedicine. Oscar Health completed its $1.44 billion IPO back in late February, selling 37 million shares at $39 each.
If you’ve moved to a new area and want to get to know your neighbor, Nextdoor can help. With an estimated IPO value of $4 billion to $5 billion, the hyperlocal Nextdoor focuses social networking on the neighborhood, connecting neighbors through recommendations and referrals, items for sale, events and alerts.
Today, it’s available in 11 countries and boasts covering 268,000 neighborhoods, including about 25% of US households. No listing date has been announced.
Ascensus dates back to 1980 when it was founded as a firm servicing the 401(k) industry. It’s since expanded into retirement planning and provides services for 529 college savings plans and health savings accounts. With more than $327 billion in assets under administration, over 3,700 employees and extensive product distribution through its own financial advisor network, the company has an IPO valuation of $3 billion. The listing date is expected in mid-2021, subject to market conditions.
The ubiquitous Instacart connects clients with surrogates who shop for and deliver groceries to your door — all through an app. With so many Americans home due to COVID, its sales hit an estimated $35 billion in 2020, putting the company in third place behind Amazon and Walmart. No viewable Form S-1 has been filed with the SEC, though the company could be going public via direct listing as soon as the first half of 2021.
The brokerage firm that introduced no-commission trading benefited from quarantine as millennials and novice traders began using their federal stimulus checks to play the market. Robinhood became the place to trade, gamifying investing and using its appeal to attract tech enthusiasts to the financial services company.
Its estimated IPO valuation is between $6 billion and $8 billion, and a listing is expected in the first quarter of 2021. Robinhood filed a confidential registration statement with the US Securities and Exchange Commission in late March.
Digital payments are a hot sector as the world continues to evolve around COVID. Due to the explosion in online and portable electronic payment systems and apps related to online commerce, we can expect them to grow in popularity alongside digital currencies.
According to the report published by Data Bridge Market, the global payment processing solutions market is expected to hit an estimated value of $78.24 billion by 2026. When it goes public, Stripe will compete with Venmo, which is owned by PayPal, and Cash App, owned by Square. We await a filing of a viewable Form S-1 with the SEC.
Looking at Bitcoin’s soaring performance, 2021 might be the year for cryptocurrencies to become viable currency, despite economists like Noriel Roubini’s warning of a bubble expanded to its limits.
Still, the momentum in crypto could benefit Coinbase, one of the largest currency exchanges in the world, with an estimated holding of about 5% of the world’s total Bitcoins. The platform is expected to go public via a direct listing in April 2021.
Why 2021 looks to be a stronger IPO market
COVID lockdowns have produced one positive financial benefit: Private equity companies have about $1.6 trillion in uninvested capital to put into merger and acquisition activity, according to an estimate from data provider Preqin. This huge cash reserve developed due to the COVID virus lockdown, high unemployment, political gridlock, fearful consumers, rising public health concerns and economic uncertainty.
Many experts predict M&A activity to heat up in the second quarter of 2021, bringing to market companies with more substantial financials. This bodes well for the IPO market, which relies on a company’s powerful story and sound balance sheets to pass the regulatory scrutiny to go public.
What’s driving strength in IPOs and the rest of the market is the continued rollout of COVID vaccines worldwide and the new presidential administration in Washington. But rehiring may be slow as smaller companies wait to see how the national vaccination program and political gridlock in Congress shakes out.
The 2021 IPO market, including January activities, should see increased activity in the financial, pharmaceutical, technology and healthcare sectors.
Companies expected to list in 2021 include some of the world’s largest: Stripe, a digital payments company with a multibillion-dollar valuation, and rocketship company SpaceX, founded by Tesla (TSLA).
How to invest in post-IPO stocks
If you’re thinking about investing in these IPOs after they go public, get started by tracking their prices over their first few months of trading. You might want to sit out the first few months, however — after the initial flurry of speculative buying and selling, when they reach a point of stability.
When a company goes public, its goal is to raise cash. This means its initial listing stock price must be on target with the market expectations of institutional and individual investors. The IPO’s key participants — company executives, investment banks and institutional investors — get an IPO price that’s different from the one offered to retail investors on an exchange.
The best way to gauge an IPO’s trajectory over the short term is to look at its closing price on opening day. Large price gains on the first day of trading invariably go to bankers and institutional investors. If the opening day price declines, it may bode well for the long-term growth prospects of the company, given its created value.
This highlights the difference between the initial IPO price, its closing price on opening day and the company’s long-term growth prospects. Let’s use Facebook (FB) as an example. When it went public in May 2012, its IPO price was $38. The stock opened at $42.05 and then finished the day at $38.23, which was close to its IPO price. But by mid-October 2012, the stock price was below $20, a 52% decline compared to the price on opening day. Facebook is now at $267.
Some IPOs gain market traction over time. NASDAQ president Nelson Griggs said recently on CNBC that the average IPO debuted in 2020 gained over 50%. That gain is larger than what posted in both the NASDAQ Composite and S&P 500 in the same period.
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