Top 5 upcoming IPOs to watch in 2020
Hundreds of companies are listing on the stock market this year. Here are 5 you shouldn't miss.
Who would have thought a pandemic would be such fertile nesting ground for IPOs?
With many major brands, especially in the tech sector, seeing stock prices surge to record highs this year as lockdowns force us to be more digital, IPOs have become a seriously hot commodity. While there are risks to investing in an "untested" company, there's no getting around the thrill that a new IPO brings, and the possibility that this next listing could be "the one".
If this year's IPO list has you excited, read on to check out some of the most anticipated offerings to date.
Ant Group IPO
The IPO of Chinese tech firm Ant Group was suspended just days before it was due to list last week. But with so much mystery surrounding it, Ant Group remains one of the most talked about IPOs of 2020.
The digital payments company was set to launch on Hong Kong and Shanghai stock exchanges on 5 November 2020, when its co-founder billionaire Jack Ma and other executives were called into a meeting with Chinese regulators and plans were halted.
Although we're still not sure of the exact details of the meeting, analysts have speculated that law makers want the company regulated more stringently as a financial company rather than a tech firm. If this happens, it could reduce the valuation of the company significantly should it try to list again.
There's nothing like a bit of mystery to get investors talking. US ecommerce company Wish confidentially filed for an IPO in September, which means it wont need to share any information until a fortnight before it lists.
The biggest advantage here is that all financial information and the listing date can be kept hidden from competitors for many months ahead of it going public.
According to analytics service SensorTower, the Wish app has seen more than 9 million downloads and is currently ranked as the 12th most popular shopping app on iPhones in the US, one spot behind eBay. Its main point of difference from other online marketplaces such as Amazon is its focus on cheap, often no-name brands, typically shipped from China.
While it takes some steel to go up against giants like Amazon or Alibaba, the pandemic has proven to be a boon to the online shopping sector, so it will be interesting to watch how the market reacts once Wish lists on Wall Street.
Bumble is the second most popular dating app after Tinder in both the US and Australia, according to SensorTower data.
Talk of an IPO started ruminating after Bloomberg published the news in early September citing "people familiar with the matter".
It's mostly rumours at this stage so there are few details that can be shared, though Bloomberg said the company could seek a valuation of $US6 billion to $US8 billion and the listing could take place in early 2021.
If Bumble does go public, investors can only hope it follows the same path as rival dating app Tinder, whose parent company Match Group (MTCH) has seen its stock rise more than 630% since it went public five years ago.
Youfoodz is an Australian meal kit delivery company that markets its products as fresh, healthy and eco-friendly.
Like other delivery food services such as UberEats and HelloFresh, Youfoodz saw order volumes spike during the COVID-19 lockdown measures. In fact, Youfoodz is forecasting revenue of $US149 million for FY2021, an 18% lift from the financial year prior.
With a recognisable brand name behind it, there's reason to believe Youfoodz could do well. Rival listed company Marley Spoon (ASX:MMM), which similarly raised $US70 million in its IPO, has seen shares jump around 80% since it listed in 2018, and the stock is up a whopping 655% so far this year.
Although IPO dates can change, at this stage Youfoodz is expecting to list on 8 December 2020.
Home sharing platform Airbnb is yet another example of a company choosing to file confidentially. We're still waiting for public details to be released (likely next week), but it's expected to be one of the biggest IPOs of 2020 if it lists in December as predicted.
We also don't know much about Airbnb's balance sheet or growth plan until it files publicly with the SEC, but analysts suggest revenue could hit $US8.5 billion by 2021. And Reuters reported the IPO was aiming to raise around $US3 billion with a valuation of over $US30 billion.
This all sounds impressive, but considering the negative impact lockdowns have had on travel stocks, it will be interesting to see how it has fared so far this year and how investors respond once it goes live.
Why invest in IPOs?
The idea of investing in an IPO is that by getting in early you can get a good price. This has certainly been the case for many top listed companies today.
If you'd bought Apple stock back in the 1980s when it first went public, your stocks would be up around 78,000% today, and 45,000% if you'd bought Netflix when it listed.
But for every listed company that makes it big, there are dozens more that go nowhere or worse. A Business Insider article reported that around half of all companies that went public last year had fallen below their IPO price, including Uber rival Lyft, which is today down more than 50% since it listed last year.
Meanwhile, two of this year's most hyped IPOs, Lemonade and Snowflake, have seen prices fall since listing, with Lemonade stock down almost 20% to date.
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 tricky 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.
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.
Because CFDs are leveraged, you can make and lose money much more quickly than you normally would trading shares directly, but this also makes them very risky. You can check out more about CFD trading in our guide.
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