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A record-breaking IPO deluge could be coming this autumn
The latest reports suggest that autumn 2021 will be the busiest period for IPO launches to date.
Potentially hundreds of new public offerings are on their way
2021 has already seen the highest number of initial public offerings since the 2000 dot-com boom. It could be about to see more as we transition into autumn.
CNBC reports that up to 110 companies will go public across the next 3-4 months. That would bring the total number of deals up to 375 – valued at a cool $125bn in fundraising.
In the pipeline, we see a mixture of companies but a significant number of FMCG and food firms are on the radar.
Grocery business Fresh Market, deliver service Instacart, and Greek yoghurt producers Chobani are in the process of making their initial filings. Adding to the list of food-related businesses prepping their IPOs are casual salad restaurant chain Sweetgreen and Impossible Foods, a manufacturer of plant-based meat alternatives.
A number of fashion firms are involved too. Warby Parker, the prescription eyewear business, will likely be going live with a direct listing in the coming months. Authentic Brands, which owns the Nautica and Eddie-Bauer brands, has been eyeballed as about to go public, alongside Indian e-commerce retailer Flipkart and sustainable footwear brand Allbirds.
Digital payment processor Toast and mobile payments processor Stripe represent some of the tech stocks possibly launching IPOs.
They may be joined by several cryptocurrency filings. We’ve already seen Coinbase, the US largest crypto exchange, go public, and there are indicators other digital currency businesses will join them. Sustainable crypto mining firm Stronghold Digital Mining is one such company.
Others to watch include EV builder Rivian Automotive, global asset manager TPG and Republic Airways.
In terms of direct listings, the only one mentioned so far is Warby Parker.
What about SPACs?
It’s thought that SPACs – special-purpose acquisition companies – may have a tougher time raising capital for initial offers in the second half of 2021. Greater scrutiny from regulators like the SEC and a drop off in investor returns from SPACs may contribute to this.
The first half of the year, however, was a SPAC bonanza. 310 such offerings were launched then, generating $70bn in funds. A further 410-blank cheque companies smashed records too when they raised $109bn in the same period.
Will investors make returns?
It’s hard to say at this stage. After market performance has generally been negative across 2021 so far. Some much-anticipated tech stocks, like Coinbase or Robinhood, underperformed after going public for a myriad of reasons. In the case of Robinhood, its links to the volatile cryptocurrency market has caused several fluctuations in the share price.
Pricing IPOs towards the lower end may help sustain growth going forward. Some IPO-tracking ETFs, such as the Renaissance Capital IPO ETF, were flat towards the end of H1 2021, but have subsequently gained traction in July and August. Public offerings since then have been had lower pricings, which may have fed into heightened investor interest.
With the rumoured number of new IPOs, however, it may be worth prepping your trading calendar now. Be sure to stay tuned to Markets.com for further initial public offering updates.
Recent IPOs in 2020: What’s happened so far?
Although there have only been a few so far in 2020, recent IPOs have proven just how much pent-up investor demand there is.
Debut stocks surge as companies tap pent-up demand
It took a while for the IPO market to come back online in 2020, with the coronavirus pandemic slamming the brakes on many planned stock market debuts. But recent IPOs have shown that the demand has not gone away. Many of the companies who have gone public have seen an explosion of interest in their stock.
In fact, according to Renaissance Capital, the first week of June was the first time in two years that all the IPOs held raised more than original expected, whether because they ended up pricing above their target range, or because they increased the number of shares on offer.
2020’s recent IPOs
JDE Peet held Europe’s largest IPO since 2018 when it went public at the end of May. The world’s second-largest packaged coffee maker raised nearly €2.3 billion. The investor roadshow was held virtually and it took just three days to sell all the shares – usually company management has to travel the world for at least a fortnight to meet investors and drum up interest.
ZoomInfo surged on its stock market debut. The company sold 44.5 million shares at $21 per share – above its target price range, which itself had been revised higher from an earlier range of $16-$18.
But even at the higher price investors snapped up the stock, causing it to open 90% higher on its first day of trading, with the first trade recorded at $40. This pushed the company’s market cap up from $8 billion to $14 billion.
Warner Music Group
The company sold 77 million shares – up 7 million from what was originally planned – at a price of $25 per share. This gave the company a market capitalisation of roughly $12.7 billion, and early trading on the day of the IPO saw this valuation surge 15% to just under $15 billion.
The company had initially signalled its intentions to go public in February, but the coronavirus pandemic meant this had to be delayed.
Pliant had to double its share offering ahead of its IPO at the start of June, with the company raising $144 million against initial plans for $86 million. The company has said the proceeds of the floatation will last it until 2023.
Vroom raced higher when the stock went public on June 9th. The company prices its IPO at $22 per share, raising just under $500 million, giving it a valuation of $2.5 billion. The stock surged over 100% on the first day of trading, hitting $45.
Some of these IPOs have seen huge demand, but there’s still plenty more to come – check out the biggest 2020 IPOs investors can’t wait for.
Morning Note: Trade war escalates, Uber IPO caution, IAG profits sag
Tariffs on $200bn worth of Chinese exports were raised to 25% last night. Trump was true to his word, and there is no can kicking. This marks a sharp escalation in the trade spat, but it’s not gone nuclear yet.
Talks between the Chinese and the Americans are continuing today, although we don’t hold out much hope of anything meaningful being achieved this week.
It all tends to suggest Mr Trump is playing one of his aces in order to force the Chinese into concessions. His bet is that the US economy can weather any hit from tariffs better than China. He is probably right but this will not help ease uncertainty about the global economy. Beijing is weighing whether to retaliate.
Yesterday the S&P 500 bounced off its lows, closing down just 0.3% at 2870.72, having plumbed lows around 2835. The Dow was offside by 139 points on the close, but was over 400 points lower at one point. Algos seemed to bidding it up after the ‘beautiful letter’ nonsense.
Oil has rallied, indicating markets have had enough of the selloff. Brent was last pushing up at 70.75, above the key 70.60 resistance point. The flag pattern does look like it could be a bullish continuation pattern that is just about complete – watch for a leg higher. But failure to cement the tentative gains we see this morning would be bearish – look for the area around 69.50 for support.
Asian stocks bounced overnight and European futures point higher today. Chinese stocks were last about 3% higher – just remember how much these stocks had sold off earlier in the week. There is still hope that a deal will be done.
Uber prices at low end
Uber priced at the bottom end of the range at $45. It’s a rough time to be coming to the market after the selloff this week but this IPO exists to a degree in its own bubble. Are you betting on the long payoff? If not, you may well be disappointed – profits are not coming any time soon.
But shares could yet pop higher today, partly because of this conservative approach that Uber clearly learned from Lyft’s bumpy ride post-IPO. I said yesterday (Uber set for big pop despite Lyft worries, 09/05/19) that I would not be surprised if the people selling Lyft stock are simply doing so in preparation for the Uber listing, so be careful reading too much into the Lyft troubles. FOMO is a strong emotion.
Nevertheless, my main concern is the slowing revenue growth. Whatever the cash burn, you’d want to see accelerating top line growth in a disruptor coming to market.
IAG profits sag
Profits at IAG were hit by rising fuel costs and a big FX headwind, whilst we see a broader thread across airlines with margins being competed away. Excess capacity remains a problem, as we heard from Lufthansa. In fact, we can pretty much regurgitate what we noted about Lufthansa – lots of competition means no one has the pricing power, whilst labour costs are a factor, but the biggest headwind right now is fuel costs, which were up 15.8%. Non-fuel costs were 0.8% higher.
Although passenger revenue growth was at a healthy clip, up in excess of 5%, first quarter operating profit slumped to €135 million before exceptional items, which was down 60% from a year before on pro forma basis. Profits after exceptional items – which were zero in Q1 – were down 86%. FX headwinds knocked €61m from the bottom line. 2019 operating profit is seen in line with 2018 – which means no growth in the year ahead.
Uber set for big pop despite Lyft worries
Uber will price its IPO today with shares set to be set somewhere between $44 and $50, with the stock to start trading on Friday.
There is certainly a more cautious tone to this one than when its big rival, Lyft, listed. Shares in the latter have fallen over 30% since IPO day. Fears that this is just the froth at the top of a tech bubble are surfacing. However with the pricing range there is a big chance of a significant pop on the day, even if one remains of a conservative disposition and wonders about the fundamentals and whether Uber can ever be profitable. FOMO will win the battle on the day, but maybe not the war.
Uber will be valued at between $80.5bn and $91.5bn, well below the $100 bandied about for some time but still well ahead of the last funding round in August, when the company was valued at around $76bn.
The FT reports that Uber will price at or below the midpoint of that range. I would anticipate a big pop on the day if that were the case, as this is already a fairly conservative range.
The latest financial figures raise as many questions as they answer. In Q1 2019, Uber made a net loss of $1bn, on revenues of $3bn. That represented growth of 18-20 per cent, solid enough, but well down from the 70 per cent growth a year ago.
Last year’s numbers also present investors with problems. 2018 revenues rose 43% last year to $11.3bn from $7.9bn in 2017 – good but slower than that of the prior year when we saw revenues double. The company burned $2.1bn in cash in 2018, albeit down from $4.5bn just a couple of years before. Meanwhile, revenues from the core ride-hailing division have flatlined over the last two quarters. Uber’s revenue for the fourth quarter came in at $3 billion, up 25 percent from the same quarter last year, but this was lower than the 38 percent in Q3.
Lyft casts something of a shadow over the Uber IPO. Having been aggressively priced ahead of going public shares in Lyft are now down over 30 per cent from where they were on IPO day. Lyft is a spectre in another sense – gaining market share from Uber. Indeed, it’s not just Lyft – Uber is losing market share to many other local rivals in a number of geographies. In the US and Canada it’s barely recovered from its 2017 annus horribilis.
Lyft’s Q1 earnings have been said to cast a pall over the Uber IPO. I would be less certain about that – it was a huge loss for sure, but below last year. Uber has said that 2019 will be when losses peak. I wouldn’t be surprised if the people selling Lyft stock are simply doing so in preparation for the Uber listing.