Fri, October 15, 2021


Sizzling U.S. stock markets await next leg of record IPO run

A booming market for U.S. initial public offerings shows no sign of slowing in 2021.

Around $180 billion was raised from IPOs on U.S. exchanges in 2020, more than double last year's total and far above the previous high of $102 billion set in 2000, according to data compiled by Bloomberg. Companies have been emboldened by soaring equity values, especially in the second half, while a proliferation of listings by blank-check firms has also boosted volumes.

"In a zero interest world, one of the only asset classes that offers the hope of performance that beats inflation is equities," said Jeff Zajkowski, head of Americas equity capital markets at JPMorgan Chase.

More than 30 companies priced deals that raised in excess of $1 billion this year, the data show. Among them were home-rental platform Airbnb and food delivery service DoorDash, which both soared more than 80% above their listing prices initially. The stampede of startup listings has raised concerns about day-one share rallies and an overheated market for new entrants.

"Markets can be very reactionary and sometimes irrational in the short term, but they're very logical and rational in the long term," said Gregg Nabhan, vice chairman of global equity capital markets at Bank of America "Some of this euphoria over the first-day pop is the market getting ahead of itself on intrinsic value."

Stocks have also been boosted by a surge in retail trading during the Covid-19 pandemic, as at-home traders have sought to benefit from rebounding equity markets.

Ashley MacNeill, Morgan Stanley's co-head of technology equity capital markets for the Americas, said that when a population is forced to sit at home and not socialize in person then "trading can become a form of social connectivity that didn't exist before."

Rising deal numbers have been possible in part because remote working has slashed the amount of time needed to prepare for and market a listing. Instead of jetting between cities to meet investors, executives and their advisers have been able pitch to potential shareholders via conference calls. This has shortened timetables and reduced the risk of sentiment toward a company, or the broader equity markets, changing.

"We basically execute the deals virtually and that has allowed us to do far more deals over far fewer days," Nabhan said.

The rush looks set to continue, with an array of companies already preparing for market debuts in the new year. Here are some of the biggest:

- Affirm. San Francisco-based Affirm Holdings Inc. provides installment loans to online shoppers. It planned to go public in December but delays at the U.S. Securities and Exchange Commission pushed the listing into 2021, people familiar with the matter have told Bloomberg News.Affirm, which made 30% of its third-quarter revenue from partnering with home exercise company Peloton Interactive Inc., was last valued at about $5.5 billion in a 2020 funding round, according to a person with knowledge of the matter. A representative for Affirm declined to comment.

Established in 2012 by PayPal Holdings co-founder Max Levchin, Affirm is also backed by Khosla Ventures, Founders Fund, Lightspeed Venture Partners and Shopify Inc.

Banks: Morgan Stanley, Goldman Sachs Group Inc., Allen & Co.

- Bumble. Dating app Bumble Trading has filed confidentially for an IPO that could come as soon as February. The company was valued at about $3 billion last year when private equity firm Blackstone Group Inc. bought a majority stake in its predecessor, MagicLab.

Bumble, which was started in 2014 by Tinder co-founder Whitney Wolfe Herd, is now seeking a valuation of $6 billion to $8 billion when it goes public, people familiar with the matter have said. Other backers include venture capital firms Accel, Bessemer Venture Partners and Greycroft.

Banks: Goldman Sachs, Citigroup Inc., Morgan Stanley.

- Coinbase. Coinbase Global, the U.S. cryptocurrency exchange, said in December it has filed confidentially to go public. The San Francisco-based company was valued at more than $8 billion in 2018 after a $300 million funding round led by Tiger Global Management.

The listing is expected to be a breakthrough moment for the cryptocurrency industry, and comes on the back of Bitcoin hitting an all-time high of more than $29,000 this week. Coinbase said it has has more than 35 million verified users in over 100 countries and in excess of $25 billion in assets on its platform.

- Databricks. Software maker Databricks Inc. is aiming to go public in the first half of 2021, potentially tapping the same investors who sent Snowflake Inc.'s shares soaring this year.

Databricks has raised about $900 million from backers including Andreessen Horowitz, Coatue Management, New Enterprise Associates, Tiger Global, BlackRock Inc. and T. Rowe Price Group Inc. Microsoft Inc. is an investor and partner through its cloud product, Microsoft Azure.

- Instacart. Grocery-delivery company Instacart Inc. is preparing for a listing, according to people familiar with the matter. Instacart's private valuation has more than doubled to $17.7 billion since the start of the pandemic, with the company surpassing milestones it had set for itself to reach in 2025.

Food-delivery success story DoorDash was valued in June at $16 billion and went public in December at more than double that amount. While Instacart has yet to file paperwork to go public, DoorDash warned in its own prospectus that any boost from the pandemic is likely to be temporary.

Instacart could seek a valuation of as much as $30 billion and is working with Goldman Sachs on the listing, Reuters reported in November.

- Qualtrics. Qualtrics International, which is being spun out from SAP, could be one of the first listings of 2021 after it filed Monday for a U.S. IPO. A listing could value the software maker at more than $14 billion, though Qualtrics hasn't said how much it plans to raise.

SAP agreed to pay $8 billion for Qualtrics in November 2018. It was the company's biggest-ever deal and an effort to compete with rivals such as Inc. Taking Qualtrics public marks a shift in SAP's strategy under Chief Executive Officer Christian Klein, who secured the top job at the company in April.

Banks: Morgan Stanley, JPMorgan.

- Robinhood.

Popular with novice investors, trading platform Robinhood Markets has been cited as one reason that some of 2020's biggest IPOs popped on their trading debuts. Next year, users of the platform will get the chance to trade the company's own stock, with a Robinhood listing lined up for as early as the first quarter.

The company, founded by Vladimir Tenev and Baiju Bhatt, saw a $460 million funding round push its value to $11.7 billion in September.

Robinhood's IPO risk factors are likely to include regulatory threats to its business. Massachusetts securities watchdogs have said the platform attracts untrained traders who take "unnecessary trading risks," without proper controls in place.

Its investors include Sequoia, DST Global, Ribbit Capital, Andreessen Horowitz, Index Ventures and D1 Capital Partners.

- Roblox. Video-game platform Roblox Corp. was set to list in December before deciding to move its IPO to next year to give it more time to plan the process, CEO David Baszucki said this month. The San Mateo, California-based company has benefited from a pandemic-fueled surge in online gaming, with the time users spent on its platform more than doubling in the first nine months of the year.

Roblox was valued at $4 billion in February, when it raised $150 million from investors including Andreessen Horowitz. The company, which was founded in 2004, also counts Altos Ventures, First Round Capital, Index Ventures, Meritech Capital Partners and Tiger Global among its backers.

Banks: Goldman Sachs, Morgan Stanley, JPMorgan.

- Others. Automation software maker Uipath Inc. has filed confidentially for an IPO in which it could be valued at more than $20 billion, while online education provider Coursera Inc. is considering a listing and mobile game maker Playtika Holding Corp. is on file.

Among fashion-focused companies, Poshmark Inc. filed for its IPO in December, online thrift shop ThredUp Inc. submitted confidential paperwork in October, and shoe retailer Cole Haan has been on file since February.

Retail chain Petco Animal Supplies has filed confidentially, while Southeastern Grocers made its own filing public in October.

Published : December 31, 2020

By : Syndication The Washington Post, Bloomberg · Crystal Tse, Katie Roof, Elizabeth  Fournier