An IPO (initial public offering) is one of the primary ways to partially or fully monetize for the initial shareholders (founder, venture capitalist and private equity capital fund) and to fund future expansion or diversification for startups or even unicorns.
After the H1CY20 stock market plunge/volatility amid COVID uncertainty, stock markets across the world are now making new lifetime highs almost every few days and weeks, thanks to unprecedented monetary as well as fiscal stimulus (led by the U.S. Fed and Congress).
Thus, after a dull H1CY20 (COVID), there is a deluge of IPOs in H2CY20 and H1CY21, not only in the U.S. but across the globe and the trend may continue until we have another bear cycle. In H1CY20, 34 Chinese companies raised around $12.5 from U.S. listing (IPO) against $12B in 2020, mostly in the 2nd half (mostly tech companies). In the last decade (2010-20), various Chinese companies raised almost $80B through U.S. IPOs, led by Alibaba ($25B). But a recent regulatory crackdown by China on some tech and educational companies for various issues may have also dampened the sentiment.
In any way, U.S. startups or even unicorns are now scrambling into the capital market flush with unlimited liquidity for monetizing, deleveraging or funding future business growth. Usually, such IPO frenzy is observed in the last cycle of boom followed by a brief doom. We are in the 10-12 years of a boom-bust cycle (2008 and then the 2020 global financial crisis caused by U.S. subprime crisis and COVID; could the next be in 2030-32??). Nevertheless, in a boom period, such as we are in now, the IPO of a well-known brand or company usually gives phenomenal listing gains, and thus investors scramble for a share. Recent U.S. IPOs were from various industries led by techs, retail, FMCG/consumer goods & services and logistics. In H2CY20, some of the U.S. IPOs are ZoomInfo (ZI-B2B database operator), Snowflake (SNOW-Cloud infra), and Airbnb (ABNB-online marketplace for lodging, guest house, and travels & tours).
Some of the blockbuster IPOs in H1CY21:
- Bumble (BMBL), an aggregator of female-led dating apps jumped more than +60% as listing gains in February 2021
- Roblox (RBLX), an online gaming platform soared almost +54% on a listing day (March 2021)
- Coursera (COUR), an online education platform and expensive IPO also surged around +36% on listing day (April 2021)
- Didi, a Chinese ride-hailing app surged a modest +29% on a listing day (June 2021) despite expensive valuation and the lingering concern of Chinese regulator crackdown
- Robinhood, an online trading platform for retail traders slumped more than -10% on a listing day (July 2021) amid the concern of expensive valuation
Some of the forthcoming IPOs for H2CY2021:
- Authentic Brands Group (ABG), a U.S. retail/brand management company dealing with various apparel, lifestyle, athletics, and entertainment brands; estimated IPO valuation $10B. ABG has more than 30 brands, 800 global partners and 6000 stores.
- The Fresh Market (TFM), a gourmet grocery/fresh food/vegetables/fruits chain (retailer). This will be their second IPO listing after being acquired by Apollo Global (an alternative investment fund/AIF) in 2016. In 2016, TFM was not able to compete with big rivals such as Whole Foods and Kroger. Now, after restructuring, TFM has physical stores in 159 locations across 22 U.S. states. Although TFM has improved its balance sheet, it’s still highly leveraged (high level of debts). But being a provider of essential goods & services (grocery & food products), TFM may be a part of a ‘K’-shaped economic recovery from COVID-19.
- Instacart operates online grocery/food products delivery and pick-up service aggregators in the U.S. and Canada. The company came into the limelight after COVID and subsequent lockdown restrictions, as the public turned to online shopping even for essential goods. Instacart has a tie-up with more than 400 retailers spanning over 30K stores, which is equivalent to a reach of almost 80% of U.S. and 70% of Canadian households. As per recent fundraising activities, Instacart was valued at around $39B.
- Rivian is an EV maker (Electric Adventure Vehicles), and an automotive tech company. Rivian mainly engaged in SUVs and pickup trucks, and is now commercializing its products (EV) from the R&D stage and is in the process of delivering two EVs in the personal vehicles segment: a new SUV (R1S) and a pickup truck (R1T). Rivian is also expanding into the commercial vehicle segment when it launches commercial electric delivery vans (CEDV). Amazon, one of its funding partners, has given a standing order for 100K CEDVs to the company. Rivian was founded by a technocrat as a startup and has now become a unicorn, so far raising around $8B. As per recent fundraising activities, Rivian may be valued at around $50B. Looking ahead, the CEDV segment may be a game-changer for the company.
Bottom line:
COVID has changed the business models of many companies and the resulting digital work-life will also stay even after COVID as it improves productivity, reduces cost, and helps the bottom line, which is the ultimate business goal. Thus, various companies are now scrambling for digital techs such as CC (cloud computing), AI (artificial intelligence), ML (machine learning), and robotics. Also, the world will now gradually transform from fossil fuel to green energy (electric, solar, hydrogen etc.). As a result, tech and EV/green energy-related IPOs are in demand amid extremely bullish investor sentiment backed by easy liquidity (QEternity).