The IPO market was significantly impacted by the COVID-19 in the first six months of 2020, affecting both potential listings as well as companies that had gone public recently. However, the IPO activity surged again in the summer, and the fall witnessed record-breaking IPOs in the technology space. The boom isn't expected to end in the new year with some very exciting IPOs expected in 2021.
In the third quarter of 2020, there was a nearly 195 percent rise in the number of IPOs year-over-year, according to FactSet. The companies went public via direct listings, traditional IPOs, and acquisitions through special purpose acquisition companies), or SPACs.
What are the upcoming IPOs in 2021?
Robinhood, a financial services company based in California, is one of the biggest IPOs to watch in 2021. In 2019, most of the major online brokers eliminated stock-trading fees, which may have initially diluted the attractiveness of Robinhood’s free-trading app. However, Robinhood continues to add customers in huge numbers. Robinhood users increased from 1 million in 2016 to 13 million in 2020. As of September, Robinhood was valued at $11.7 billion.
Bumble, the dating app which allows women to make the first move, is likely to go public in the first quarter of 2021 with a valuation of about $8 billion. The app had nearly 100 million users as of mid-2020. Bumble’s users can find career and friendship connections in addition to romantic links.
App-based grocery delivery service Instacart could also go public in 2021. The company’s valuation increased from $7.9 billion at the start of 2020 to $17 billion in October. Instacart serves as a middleman between stores that don't have their own delivery system in place and people seeking to buy groceries while staying at home. The other biggest IPOs to watch in 2021 are Nextdoor, Better.com, SpaceX, Stripe, GitLab, DataBricks, Coinbase, and Petco.
How to invest in IPOs once they've listed
Experts believe the 2020 IPO boom will continue next year.
Market experts believe the IPO boom is only beginning. This year has been a surprisingly good year for companies going public. There were 194 traditional IPO deals that raised about $67 billion, indicating the best year since 2014. However, it was an even better year for SPACs. More than 200 SPAC deals raised about $64 billion in 2020.
According to a CNBC report, "an up market, and an improving economy, will be helpful to both [SPACs and traditional IPOs].” However, what goes up. must eventually come down.
Some experts warn U.S. tech stocks are a bubble that's bound to burst.
Amundi’s chief investment officer Pascal Blanque believes that there is a bubble in the boom of the U.S. tech stocks. According to Reuters, Blanque said, “It’s a perfect bubble waiting to burst. It’s not if, but when.” Blanque added, “you cannot justify the current valuations and investors should adjust their stock portfolios accordingly.” The bubble will burst when interest rates rise or “over exuberance” in the technology sector disappears.