After defying pandemic, IPO market is bracing for another busy year

Apart from the virus crisis, 2020 will likely be remembered for the hectic IPO activity Wall Street has witnessed. Interestingly, in a market devastated by the pandemic, the majority of the companies that went public this year had a good start.

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Read management/analysts comments on quarterly earnings reports

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Technology Leads

The buzzword in the IPO market has been “technology”, with a record number of tech startups filing to go public and most of them entering the stock markets on a high note. Some of them found a place in the list of the biggest ever debuts, like DoorDash, Inc. (DASH) that raised about $3.4-billion in last week’s IPO.

The food delivery service had an upbeat start and the ripple effects of the stock rally were felt across the industry, with rivals like Grubhub Inc. (GRUB) making strong gains. DoorDash closed the last trading session around 55% above the offering price.

P2P Marketplace

On December 9, Airbnb, Inc. (ABNB) became a public company in a blockbuster IPO. The initial surge pushed up the hotel booking platform’s market value to about $100 billion at one point. Interestingly, the companies have a similar business model that is based on the concept of peer-to-peer marketplace, like that of ride-hailing companies Uber Technologies, Inc. (UBER) and Lyft, Inc. (LYFT) that made their Wall Street debut last year with much fanfare.

Meanwhile, there is skepticism about the prospects of these tech companies generating profit with consistency, considering their heavy cash burn and reliance on external funding.

Others in the List

Cloud infrastructure firm Snowflake Inc.  (SNOW) filed for IPO in September, raising about $3.7 billion in what was the biggest IPO until then. It outshined the June-debut of New York-based Royalty Pharma (RPRX) that was a hit among investors.

The other important businesses that entered the public realm this year include cybersecurity firm McAfee Corp. (MCFE), software developer Palantir Technologies Inc. (PLTR), Insurance company Lemonade, Inc. (LMND), and used-car retailer Vroom, Inc. (VRM).

The latest to join the bandwagon is e-commerce startup Wish which filed to go public this week. The company, which is yet to generate profit, witnessed a sharp increase in revenues during the pandemic as the movement restrictions made shoppers shift to online platforms en masse.

Looking Ahead

While the recent IPOs elicited a mixed reaction from the market, aspirants Roblox Corp., a video-game platform, and financial technology firm Affirm Holdings postponed their stock market debut to explore more effective options. They are expected to go public early next year, to be joined by software firm UiPath and cloud platform Databricks. Once again, the focus will be on technology, thanks to the digital transformation spree.

Others in the queue include online dating platform Bumble that is set to become a public entity early next year, with an estimated IPO valuation of $6-$8 billion. The company bets on the growing ad revenue and strong user growth during the lockdown to drive the expansion.

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Spike in online gaming gives Zynga a record quarter

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Gaming technology firm AppLovin stands out among the IPO aspirants for being already profitable, something that is very rare in the market. The company’s offerings have been very popular among app and game developers and the trend is expected to continue, given the recent increase in the consumption of online content. ThoughtSpot Inc., which develops business analytics software, is planning its IPO in the final months of 2021.

Upcoming Non-tech IPO

Outside the tech space, companies planning their stock market entry in 2021 include Petco Animal Supplies, Inc. which expects to raise about $6 billion. The company might attract investors, supported by the brand power and extensive store network though it faces competition from e-commerce players like Amazon (AMZN). Meanwhile, going public is not something new for Petco for it has gone through the process a couple of times earlier but was taken private subsequently.