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Expected IPO surge in 2021



Investors have failed to live up to expectations, and a large number of initial public offerings will be conducted at a record speed in 2020. Few people think that this euphoria will soon disappear.

When the pandemic began to close the U.S. economy in March and the stock market was sluggish, after the activity in 2019 was lower than expected, veteran IPO observers ushered in another disappointing year.

Average performance on the first day of listing

After a brief pause, the Fed hinted that it would take unconventional measures to support the economy. The stock market rebounded from a steep rebound and new issuance activities resumed in late May. Several stocks subsequently listed soared, laying the foundation for the competition for the open market. After a short holiday pause, it is expected that the new year will appear again.

According to data from Dealogic, as of December 24 this year, the company has raised US$167.2 billion through 454 stocks issued on the American Stock Exchange. In 1999, when the Internet boom was at its peak, it reached a history of US$109.7 billion. recording. The coronavirus pandemic changed the typical rhythm of the IPO market, raising $67.3 billion in the fourth quarter. This is about six times the total of the three months before the year.

The result of the competition is the strong backing of the 21st century economy including Airbnb the company

Dash the company

And Palantir Technologies the company

It is now publicly traded and can be used by ordinary investors.

The unexpected surge of special purpose acquisition companies (SPACs) has promoted the development of the IPO market. These empty companies raise funds through listings and then look for companies to merge. They are betting that an unknown business will generate substantial returns and represent risk appetite, which is driving new problems and wider markets.

Airbnb CEO Brian Chesky went public on the Nasdaq on December 10, at the height of the IPO frenzy this year.


photo:

Mark Lenihan/Associated Press

Almost half of all funds raised in the IPO market are spent on SPACs, and the funds raised through SPACs this year are almost six times that of the record raised in 2019 in the previous year.

The IPO frenzy peaked in the second week of December, which is usually a quiet period for new stock issuance at the end of the year, when Airbnb and DoorDash both doubled on the first day of the transaction. This brings the valuation of two companies that have not yet generated stable profits to tens of billions of dollars.

These gains have aroused concerns among some people who fear that the IPO market will overheat and compare with the period before the dot-com bubble burst in early 2000. They indicate a surge in interest from individual investors, many of whom use Robin Hood Financial Ltd., a popular brokerage app operated by Google. They said that if history is the guide, then once the market reverses, such investors are obliged to exit.

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Colin Stewart, Morgan Stanleyof

The head of the global technology stock capital market said that investors have “unlimited interest” in certain stocks, especially those that have attracted the imagination of retail investors. He said: “The trend and valuation of certain stocks is not necessarily based on business fundamentals.”

This concern became apparent when two companies planning to go public after Airbnb and DoorDash (Roblox and point-of-sale lender Affirm Holdings Inc.) decided to postpone the listing. According to people familiar with the matter, Roblox officials are particularly worried about whether the video game platform should be spent on the first day of popularity.

DoorDash’s initial public offering and the subsequent soaring stock price have brought the food delivery company’s valuation to tens of billions of dollars.


photo:

Courtney Crow/Nose Handout/Shutter

Not all new entrants are warmly welcomed by public investors. For example, a week after the debut of Airbnb and DoorDash, the parent company of the e-commerce site Wish closed the market below its IPO price on the first day of the transaction.

Few bankers predict that the current pace will soon fade. Multi-billion dollar-plus startups, such as Robinhood itself, Bitcoin exchange Coinbase Global Inc., and grocery delivery service Instacart Inc., are all waiting. More international companies, such as South Korean e-commerce company Coupang Corp., are also considering listing on US exchanges.

Price performance of the top ten new stocks in the U.S.
By transaction value

Churchill Capital Corporation IV

Churchill Capital Corporation IV

Churchill Capital Corporation IV

Churchill Capital

Company IV

The SPAC craze is likely to continue.Well-known technology investor Softbank Group the company

A possible SPAC file application was submitted in late December. People familiar with the matter said the Japanese conglomerate is considering plans to launch at least two more products in 2021.

The series of activities began in late May, the largest issue since the beginning of the pandemic, namely the IPO of the insurance policy comparison website SelectQuote the company

After the issue price exceeded the initial range, US$570 million was raised. The stock rose 35% on the first day of trading.

Several companies subsequently gave investors even greater victories. Vroom the company

An online used car seller, which went public in early June, and Lemonade the company

An insurance start-up that was established about a month later doubled on the first day of the transaction. The performance has stimulated more companies’ plans to promote new issues.

Dealogic’s data shows that this year’s technology IPO (the backbone of the new issuance market) recorded the largest increase in its first trading day since 2000, with an average increase of 34% compared to 65% at that time. (Overall, IPOs rose by about 18% on the first day of listing.) On average, IPOs in 2020 are about 48% higher than their original prices.

There is great interest in some IPOs, while others are frustrating, and it is particularly difficult for underwriters to find the right price to issue shares.

Snowflake’s stock recently traded at $304, more than twice its IPO price.


photo:

Richard B. Levine/Zuma Press

Take snowflakes the company

It went public in September at a price of $120, roughly three times the target price when the data warehouse company began to sell stocks to investors. The stock still more than doubled on the first day of trading, and has recently increased by more than 150% from its issue price.

There are signs that the company will continue to try to enter the public market, Palantir and the small tech startup Asana’s new approach the company

Debut without raising funds. The so-called direct listing, which is only used by four major companies, is expected to become popular in 2021, after the Securities and Exchange Commission (Securities and Exchange Commission) stated in December that it would allow issuers to use them for public offerings. funds.

No matter which method is adopted, the interest of startups in going public shows no signs of abating. John Chirico, Co-Head of Capital Markets and Consulting, Citigroup North America Bank the company

The company said: “I have seen the benefits and value of an unprecedented public listing.”

Private companies are flocking to special purpose acquisition companies or SPACs to bypass the traditional IPO process and obtain a public listing. The Wall Street Journal explains why some critics say that investing in these so-called blank check companies is not worth the risk. Illustration: Zoë Soriano / WSJ

Write to Maureen Farrell, Email: maureen.farrell@wsj.com

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