Record the IPO boom to continue in 2021

After a brief hiatus, new spending resumed at the end of May after the Federal Reserve indicated it would take extraordinary measures to sharpen the economy and recover the stock market from a sharp decline. Several stocks debuting at the time have skyrocketed, and this is the road to a race to the public markets that is expected to increase again in the new year after a short holiday break.

Companies raised $ 167.2 billion through 454 listings on U.S. stock exchanges this year through December 24, compared to the previous annual record of $ 107.9 billion at the height of the dot-com boom in 1999, according to Dealogic. The coronavirus pandemic turned the typical rhythm of the IPO market on its head, with $ 67.3 billion raised in the fourth quarter. This is about six times the total for the first three months of the year.

As a result of the turmoil, stalwarts of the 21st century economy, including Airbnb Inc.,

DoorDash Inc.

and Palantir Technologies Inc.

is now publicly traded, accessible to the average investor.

The IPO market has received a boost due to a surprising boom in specialty procurement companies, or SPACs, empty vehicles that raise money through listings and then look for businesses to merge with. It is a bet that an unknown business will deliver a strong return and characterize the risk appetite that new problems and markets fuel.

Nearly half of all fundraisers in the IPO market were for SPACs, and the total raised by SPACs this year is almost six times as many as the vehicles raised in 2019, the previous record-setting year.

The IPO frenzy peaked in the second week of December, usually a quiet time for new listings as the year-end approached, when Airbnb and DoorDash both more than doubled in their first trading day. This gave the two companies, which still had to make steady profits, valuations that stretched to ten billion dollars.

These gains have raised eyebrows among some people who are worried that the IPO market has overheated, and draw similarities with the period before the internet bubble burst in early 2000. This indicates an increase in interest among individual investors, many of whom use a popular brokerage app run by Robinhood Financial LLC. If history is a guideline, they say, such investors are likely to be able to face the exit parties once the markets turn their backs.

Colin Stewart, Morgan Stanleysay

global head of technological equity capital markets, said investors have an “unlimited interest” in certain stocks, especially those that have captured the imagination of retail investors. “The movements and valuations of certain shares are not necessarily based on the business basis,” he said.

Such concerns were evident when two companies planning to launch in the wake of Airbnb and DoorDash – Roblox Corp. and the sales provider Affirm Holdings Inc. – decided to delay their listings. Roblox officials in particular were concerned about leaving money on the table if the video game platform also had a big first-day pop, 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 e-commerce site Wish closed on the first day of trading below its IPO price.

Few bankers predict that the current pace will decline soon. A whole bunch of billion-dollar start-ups, like Robinhood itself, the bitcoin exchange Coinbase Global Inc. and grocery delivery service Instacart Inc., waiting in the wings. Many more international companies, such as the South Korean e-commerce company Coupang Corp, are considering listing on US stock exchanges as well.

And the SPAC frenzy is likely to continue. Well-known technology investor SoftBank Group Corp.

submitted paperwork 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 the plans.

At the end of May, when the biggest offer since the start of the pandemic, the launch of the website SelectQuote for the comparison of the insurance policies, began. Inc.

raised $ 570 million after prices above an initial range. The shares rose 35% on their first trading day.

Several companies followed and won more investments. Pious Inc.,

an online used car dealer starting in early June, and Lemonade Inc.,

an insurance start that followed about a month later more than doubled in their first trading day. The performance has encouraged more companies to continue with plans for new expenses.

This year’s tech stock market goers – the backbone of the new spending market – made the biggest profit on their first trading day since 2000, averaging 34% compared to 65%, according to Dealogic. (In total, IPOs jumped about 18% on their first trading day.) 2020 IPOs rose by an average of about 48% from their original prices.

The extreme interest in some IPOs, while others are waning, has made it especially difficult for underwriters to find the right price for stocks to debut.

Take Snowflake Inc.

It hit a price of $ 120 in September, or about three times what the data storage company targeted when it started marketing the shares to investors. The stock has more than doubled on the first day of trading and has recently been more than 150% higher than the stock market price.

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

made their debut without raising money. The so-called direct listings, which were used by only four large companies, are expected to increase in popularity in 2021 after the Securities and Exchange Commission said in December that it would allow issuers to raise capital when they use it to go public. .

Whatever the method, the interest of startups in becoming public shows no signs of diminishing. John Chirico, Co-Head of North American Banking, Capital Markets and Advice at Citigroup Inc.,

said companies “see the benefit and value of being public like never before.”

Write to Maureen Farrell by [email protected]