Register the IPO surge set to start in 2021

After a short break, the activity of the new issues was resumed at the end of May, after the Federal Reserve signaled that it would take extraordinary measures to consolidate the economy and that the stock market returned after a sharp decline. Several stocks that have started around since then have grown, setting the stage for a race to the public markets that, after a short holiday break, is expected to return in the new year.

The companies raised $ 167.2 billion through 454 bids on U.S. stock markets this year through Dec. 24, compared to a previous year-long record of $ 107.9 billion, at the height of the dot-com boom in 1999. , according to Dealogic. The coronavirus pandemic transformed the typical pace of the IPO market, with $ 67.3 billion raised in the fourth quarter. This is about six times higher than in the first three months of the year.

As a result of the turmoil, 21st century economists are stalling, including Airbnb Inc.,

De Dash Inc.

and Palantir Technologies Inc.

are now publicly traded, accessible to the average investor.

The IPO market has gained momentum from a surprising increase in special purpose procurement companies, or SPACs, empty vehicles that raise money through listings and then look for businesses to merge with. They are a bet that a still unknown business will generate steep returns and typify the risk appetite that fuels new problems and markets on a larger scale.

Almost half of all fundraisers on the IPO market were for SPACs, and the total raised through SPACs this year is almost six times higher than vehicles raised in 2019, the previous year of registration.

The IPO front peaked in the second week of December, usually a quiet time for new deals as the end of the year approaches, when Airbnb and DoorDash doubled on their first trading day. This has given the two companies, which have not yet produced substantial profits, valuations that stretch to tens of billions of dollars.

These gains have raised eyebrows among some who worry that the IPO market is overheating and are paralleling the period before the bursting of the Internet bubble in early 2000. They indicate a growing interest among individual investors, many of whom use a popular brokerage managed by Robinhood Financial LLC. If history is a guide, they say, such investors are likely to run for exits as soon as markets reverse course.

Colin Stewart, Morgan StanleyS

Global head of technology capital markets, said investors have “unlimited interest” in certain stocks, especially those that have captured the imagination of retail investors. “The movements and valuations of certain stocks are not necessarily based on the fundamentals of the business,” he said.

Such concerns were evident when two companies that had planned to debut Airbnb and DoorDash – Roblox Corp. and the point of sale creditor Affirm Holdings Inc. – they decided to postpone their lists. Roblox officials, in particular, were worried about leaving money on the table if the video game platform would also have a big pop on the first day, according to people familiar with the matter.

Not all new entrants receive a warm welcome from public investors. The week after Airbnb and DoorDash made their debut, for example, the parent of the e-commerce site Wish closed below the IPO price on the first day of trading.

Few bankers predict that the current pace will slow soon. Lots of startups worth over billions of dollars, such as Robinhood itself, the bitcoin exchange Coinbase Global Inc. and Instacart Inc. food delivery service, waiting in the wings. Many other international companies, such as the South Korean e-commerce company Coupang Corp., are considering listing on US stock exchanges.

And the SPAC frenzy is likely to continue. Noted investor in SoftBank Group technology Body.

submitted the documents for a potential SPAC at the end of December. The Japanese conglomerate is considering plans to bring at least two more to market in 2021, according to people familiar with its plans.

The workflow began in late May, when it was the largest bid since the onset of the pandemic, the IPO of the SelectQuote insurance policy comparison site Inc.

raised $ 570 million after exceeding an initial range. The shares increased by 35% on the first trading day.

Several companies followed, offering investors several big victories. Vroom Inc.,

an online seller of used cars that debuted in early June and Lemonade Inc.,

an insurance launch that followed about a month later, more than doubled on their first day of trading. The performance encouraged several companies to move forward with plans for new issues.

This year’s technology IPOs – the backbone of the new issue – recorded the highest gains on the first trading day in 2000, at 34% on average, compared to 65% then, according to Dealogic. (Overall, IPOs increased by approximately 18% on the first trading day.) On average, IPOs in 2020 increased by approximately 48% compared to initial prices.

The extreme interest in some IPOs, while others are disappearing, has made it especially difficult for subscribers to find the right price for the shares they are starting.

Get snowflake Inc.

It went public in September at a price of $ 120, or about three times what the data storage company was aiming for when it began trading the shares to investors. The stock has more than doubled on the first day of trading and has recently risen by more than 150% from the IPO price.

In a sign, companies continue to experiment with new ways to access public markets, Palantir and the smaller technology startup Asana Inc.

they started without raising money. The so-called direct listings, which have been used by only four large companies, are expected to gain popularity in 2021 after the Securities and Exchange Commission said in December that it would allow issuers to raise capital when they use them to become public. .

Whatever the method, the interest of startups to become public shows no signs of reduction. John Chirico, co-chief of North American banking, capital markets and consulting at Citigroup Inc.,

he said that companies “see the advantage and value of being public as they have never had before.”

Write to Maureen Farrell at [email protected]