8 market-moving IPOs to watch for in 2021
Favourable conditions mean hundreds of companies are lining up to list on the stock market. Here are some of the most anticipated.
Airbnb (NASDAQ: ABNB) shares have rallied, DoorDash (NYSE: DASH) turned out to be one of the hottest stocks of 2020, while Bumble (NASDAQ: BMBL) has seen its valuation surge. The last two months have proven to be excellent for companies that risked coming out with initial public offers in the middle of a pandemic.
There are excellent reasons for this. Central banks the world over are focused on fighting the economic impact of COVID-19 lockdowns through an easy money policy, which has meant financial markets are awash with liquidity. With interest rates at all-time lows, investors have been left to scout for any opportunities that generate higher returns – and what better place than stock markets?
There are no signs central banks will be shutting the money supply tap anytime soon, which means more well-known companies are lining up for their stock market debuts to take advantage of the favourable conditions this year.
It pays to be prepared, so here is a list of some of the most-talked-about IPO candidates for 2021.
The grocery delivery app has seen rapid growth over the last year as the pandemic turned 2020 into a game-changer, spurring millions of people to adopt app-based delivery services. Instacart has a logistics system with over 30,000 retailers, reaching about 80% of US and 70% of Canadian households.
The company’s last round of funding in 2020 valued the business at US$17.7 billion, but its increasing popularity since combined with the hiring of major investment banks could see its valuation nearly double to around US$30 billion, with an IPO expected within the first half of this year.
The recent GameStop (NYSE: GME) short squeeze controversy earned Robinhood tons of unfavourable reviews, but that also underlined the zero-commission trading app’s popularity. USA Today reported that at the height of the controversy, Robinhood was still being downloaded 600,000 times every day.
The brokerage last raised cash during that debacle and the bets are that despite ongoing regulatory scrutiny and charges of misleading customers, Robinhood could make its stock market debut in the second quarter of 2021, at a valuation between US$10 billion and US$20 billion.
The payments processing software company has been another beneficiary of the booming demand for digital payments in the wake of the coronavirus pandemic.
At its last round of financing in April 2020, Stripe was valued at US$36 billion but the surge in online shopping since means that if an IPO goes ahead, the company could get a valuation between US$70 billion and US$100 billion, making it one of the biggest potential debuts this year.
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With Bitcoin trading at all-time highs, the largest cryptocurrency exchange in the US has filed a draft registration statement for an IPO, with the direct listing offering expected in coming weeks.
Coinbase’s last funding round in October 2018 valued it at US$8 billion, but it has since grown its base to over 35 million investors across more than 100 countries. Pre-IPO share trades on the NASDAQ have valued the company between US$50 billion and US$75 billion.
One of the most popular online gaming platforms, Roblox has revived plans to go public, making it one of the most anticipated stock market debuts of 2021.
Although loss-making, the company has benefited from a surge in the popularity of video games during the pandemic and was valued at US$29.5 billion in a fundraising round in January.
Roblox expects its shares to start trading on the NYSE on 10 March.
It is one of the pioneers of autonomous electric vehicles (EV) market and considered a key competitor to Tesla in the US. The company plans to begin delivery of its two consumer vehicles in 2021 and already has supply deals tied up with Amazon and Ford.
The success of the DoorDash IPO late last year has significantly raised the prospects of its UK-based food-delivery rival Deliveroo debuting on the UK stock market within months.
US giant Amazon (NASDAQ: AMZN) already holds a 16% stake in the business and Deliveroo’s last round of funding in January valued it at US$7 billion. The IPO could value it closer to US$10 billion.
While relatively smaller than the other candidates in this list, Airtasker is one of Australia’s renowned tech stories, a flag bearer of the gig economy and one of the most anticipated local IPOs.
The company, which allows users to find people to get tasks done for them, is seeking to raise $84 million and will debut on the ASX next month.
The offer will include 105.6 million existing shares from selling holders, with most of the proceeds to go to them. The balance will be used for marketing and investment in product development.
Why invest in IPOs?
The basis of investing in an IPO is that by getting in early you can get a good price. This has certainly proven to be the case for some of the top listed companies including Amazon, Apple and Netflix.
But IPO investing also incorporates significant risk. For every listed company that makes it big, there are hundreds that go nowhere or worse, lose value. For example, the much-hyped Uber sank below its IPO price soon after debut and has taken two years to regain the value. Rideshare rival Lyft is still trading nearly 50% below its IPO price since listing in 2019.
How to invest in IPOs
There are a few different ways you can invest in an IPO. You can invest prior to the company listing on the stock exchange or once it goes public.
If you're looking to get a bargain price, buying pre-listed stock offers the best opportunity. However, it can be difficult to buy pre-listed stock in Australia, as you'll normally need to be signed up to one of the lead managers appointed by the company to handle its IPO. And it's even harder to buy pre-listed stock in US or other global companies.
It's much easier to buy stock once it lists on the exchange. To do this, you'll need to sign up to a share trading platform or full-service broker. Planning on buying US stocks? You'll need to find a US broker, such as such as eToro.
Your other option is to trade stocks through CFDs. These are derivative investment products that allow you to trade using leverage. When you trade stock CFDs, you don't ever own the underlying shares, instead you're betting on a stock's price movements (either up or down) by way of a contract.
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