IPO 2021? Nothing can get an investor’s heart racing more than these three letters: IPO. That’s right, IPO: initial public offering, the birth of a publicly traded company. The IPO 2020 season was a good one. In spite of the pandemic.
Why do investors clamor over trying to get a piece of the action when a stock debuts on Wall Street? For some companies, this is the cheapest they'll ever be.
And if it's a well known, well-run company, this could mean a long-term windfall for savvy investors who are able to get in on the ground floor.
With the current coronavirus pandemic, many on Wall Street presumed that there would not be many IPOs in this uncertain environment.
Fortunately for knowledgeable investors, Wall Street was wrong. Let’s take a look at some of the companies that debuted this year, as well as some that are anticipated to debut later this year and into 2021.
What Is an IPO and What Does the IPO 2021 Season Have in Store?
- I guess we should get this out of the way, in case you're not sure of what an IPO is. An initial public offering is when a company wants to move from a privately owned company, to a publicly traded one. This means that, while executives can still maintain control, they do cede some control of the company to public shareholders.
When you're buying shares of a company, you're buying a minority stake in it no matter how small or big your investment is. A privately run company can do as it pleases more or less without having to abide by a voting structure from its shareholders.
There are a couple of different types of IPOs as well. Depending on the financial stability of the company, existing internal shareholder count, and other factors that we will go over. What should we expect for the IPO 2021 season?
This is probably the most common way that a company can debut. By utilizing underwriters to facilitate the IPO process while charging a sometimes steep commission per share.
These are the stocks that have a much publicized stock offering date. They often have the most volatility the first few weeks when it goes public.
For example, of some big name IPOs from this past year include American Well (NYSE:AMWL), Lemonade (NYSE:LMND), Snowflake (NYSE:SNOW), and GoodRX (NASDAQ:GDRX).
But we want to know what the IPO 2021 season has in store for us traders. The IPO 2020 season was good to us.
2. Direct Listing
A direct listing is when a company decides to skip the underwriter part of an IPO and go directly on to the market without any prior institutional investor backing.
When a company directly lists to the public exchanges there are no new shares created. Instead, the existing shares are simply available for trade with the public now.
Because of this, there isn't as much volatility and investors may even see the stock go lower as insiders begin to sell some of their shares.
The best example of this from 2020 is the data analytics behemoth Palantir (NYSE:PLTR). We'll be seeing this IPO 2021.
3. SPAC IPO
Here is the method that investors are starting to become familiar with. SPAC IPOs have been all the rage this year. In fact, several high profile venture capitalists have been pumping these out on a regular basis.
The SPAC stands for Special Purpose Acquisition Company. It's a publicly traded stock that represents a shell company or a blank check company's use to raise capital to merge with a company to go public.
These are often utilized when a smaller company wants to go public. They can use the extra capital to expand operations. Some well-known SPAC IPOs from this year include DraftKings (NASDAQ:DKNG), Nikola (NASDAQ:NKLA), and Hyliion (NYSE:HYLN).
Any Other IPOs for 2020?
- Is the 2020 IPO season done? The IPO rumor mill is always swirling. Currently there are several big name companies that are looking to make the leap to the public equity markets by the end of the year. Some of these you'll have heard of and probably even used. And some may be companies you'll want to dig into.
2020 IPO season can look forward to this one. Surely, most people have heard of Airbnb by now. The short-term rental behemoth has been a travel industry disruptor since it was founded back in 2008.
Since then, Airbnb has offered over 7 million accommodations in over 220 countries around the world; making it the premier private rental company in the world. An IPO for Airbnb would fetch a value in the neighborhood of $18-20 billion.
One of, if not the biggest name in food delivery, DoorDash filed for an IPO back in February. It's been rumored to be eyeing a fourth quarter Wall Street debut. Hurray for the 2020 IPO season!
What would this mean for investors? As the world continues to be mired in the COVID-19 pandemic, home food delivery has been at an all-time high. Yet, companies such as Uber (NYSE:UBER) have yet to be able to turn food delivery into a profitable business.
This is another 2020 IPO stock that may be coming. This one isn't as much of a household name as Airbnb or DoorDash, however. But GitLab is a big name in the DevOps world that provides issues management and deployment pipelines in an open-source environment.
Translation, it allows a team of programmers to collaborate on code. GitLab is eyeing a smaller public valuation and has already announced a Wall Street debut date of November 18, 2020.
Looking Ahead to IPO 2021
- A brief look into the future shows us that there should be plenty of more companies making the switch over to the public markets in 2021 as well. Exact dates may not be available just yet. However, we can tell by raising capital and filing with the SEC, a company is on the verge of going public. Here are a few to watch for an IPO 2021.
1. Instacart IPO 2021
Talk about one of the big winners during the COVID-19 pandemic, Instacart can be described as the Uber or DoorDash of grocery shopping. People who don't want to go gorcery shopping can use Instacart.
They hire “shoppers” to go get the groceries and deliver them to the customers. Estimated sales through Instacart topped $35 billion this year. Which places it third behind Amazon (NASDAQ:AMZN) and WalMart (NYSE:WMT).
What?! Third behind Amazon and WalMart?! An entire company built upon an eCommerce platform, founded by a former Amazon engineer.
As the world continues to deal with the coronavirus quarantine, Instacart promises to be one of the winners of the new normal we are living in. Good for the IPO 2021 season.
2. Robinhood IPO 2021
Another big winner during the COVID-19 quarantine was Robinhood. A good percentage of Americans were stuck inside holding stimulus checks and trying to grow their money through trading stocks.
Robinhood became the platform of choice for the new age retail investor as a younger, tech-savvy crowd fell in love with the digitization of stock trading.
The rise in interest just so happened to occur during one of the most volatile periods the stock market has ever seen. We entered a bear market and recession at the end of March. Then followed by all-time highs by the end of July.
Founded in 2013, Robinhood was a disruptor from the start. They introduced $0 commissions for trading before any of the other big financial players. The surge in popularity has also cast a negative stigma towards Robinhood users.
They're seen as young investors who generally are unsure of what they're doing when it comes to investing. However, they're driving an IPO 2021 for Robinhood.
3. Stripe IPO 2021
Digital payments are one of the hottest sectors right now as the world continues to evolve throughout this pandemic. Moving forward, we can expect digital payment methods and digital currencies to only grow in popularity.
We've already seen popular apps like Venmo, which is owned by PayPal (NASDAQ:PYPL) and the Cash App, which is owned by Square (NYSE:SQ) dominate our mobile payments.
Add Stripe to that list as a huge spike in online shopping has led to the fintech company catching the eye of big name investors like Peter Thiel, Elon Musk, and Google.
After the most recent round of funding and investments, Stripe has been given an estimated valuation of $35 billion.
That's more than Palantir or Airbnb, making it the most valuable fintech company not on the publicly traded markets. That'll get the IPO 2021 traders licking their chops.
4. Coinbase IPO 2021
Talk about disruptors, cryptocurrencies have hit the mainstream and become at the very least, a viable form of investment. Widespread usage of BitCoin or any other crypto as a currency isn't quite as mainstream as some may lead you to believe.
However, the tide is turning towards establishing some of these cryptos as legitimate forms of payment. Coinbase is one of the biggest crypto exchanges in the world. They have an estimated 5% of the world’s total BitCoin in its users’ wallets.
Currently there's anywhere from 4500-7000 different cryptocurrencies traded in the world. Which in itself creates an almost stock market-like feel to the industry.
For those traditional investors who have yet to get into crypto trading, buying shares of Coinbase as a publicly traded company could be a way of getting exposure to cryptos; without actually buying coins. Hello IPO 2021!
IPO 2021 Conclusion
You've probably noticed a tech flavor to next year’s hottest potential IPO 2021 season. It speaks volumes as to why the tech sector has dominated the equities markets over the last few years.
Tech stocks have experienced exponential growth like no companies in history have before. There's a reason the biggest companies in the world by market cap are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Facebook (NASDAQ:FB).
As always, keep your ears and eyes out for when companies may make their debuts on Wall Street. It may be your once in a lifetime chance to get in on these great companies on the ground floor.