Despite putting the world on pause and plunging the economy in a recession, 2020 was a fantastic year for IPOs. The stars of the IPO market were Snowflake SNOW, a data warehousing business, DoorDash DASH, a food-from-restaurants delivery service; and the eagerly awaited Airbnb ABNB.
Fintech company Affirm AFRM founded by Max Levchin, the co-founder of Paypal Holdings PYPL, was scheduled to make its public market debut in 2020 before pulling out due to the huge debuts of the before mentioned companies. Mobile gaming company Roblox RBLX that is partnering with Tencent Holdings TCEHY, also its part owner, in launching a game in China, also decided to postpone its IPO for the same reasons. By the looks of it, 2021 is expected to be just as exciting as 2020 on the IPO front.
Robinhood is a relatively new stock-trading platform that was one of the first to offer zero commission trading and enjoyed an increase in users during the pandemic. It boasted 10 million users in late 2019 and added 3 million more accounts during the first quarter of 2020, appealing especially to younger, newer investors.
Crunchbase reported that Robinhood has received a total of $1.7 billion in venture-capital funding from Sequoia Capital, Institutional Venture Partners, and D1 Capital Partners.
Bumble is a dating app with more than 100 million users that has expanded its scope to help its users meet friends and create a network with fellow professionals. Its dating service is distinguished by allowing women to make the first move. Bumble is reportedly looking to make its public market debut in February around Valentine's Day, with a value ranging between $6 billion to $8 billion. Once public, it will have deeper pockets with which to compete against Match Group and other competitors. It is backed up by Blackstone Group BX.
The grocery delivery company is one of the success stories of this pandemic period. Like DoorDash, it experienced a huge surge in demand as many consumers suddenly found themselves in need of grocery deliveries. Reportedly, about 85% of US households have access to Instacart delivery, earning its status as a national force. As of November, it is worth $17.7 billion as it grew beyond its core grocery segment with deals with Walmart WMT, cosmetics company Sephora, and electronics store Best Buy BBY. It has already hired Goldman Sachs GS as its underwriter, as the IPO could happen in early 2021, according to CNBC.
Nextdoor.com is a popular website and app that lets neighbors communicate with each other about lost pets, burglaries, recommended handy people and anything that neighbours might need to discuss. In October, it was rumored that the company was looking into an IPO, with valuation expected in the range from $4 billion and $5 billion.
Best known for its Stripe Payments system, the company's services are being used by millions of businesses across the globe. This fintech player boasted a valuation of about $36 billion as of an April round of financing, and it is most likely worth much more today. Its valuation is near $70 billion. There's been hype about a Stripe IPO for a long time, as other companies like Square SQ have gone public but the company has been in talks about a possible SPAC merger to take the company public.
IPOs can be both exciting and dangerous
The earliest investors in companies such as Amazon.com AMZN and Netflix NFLX have done phenomenally well, but the majority of companies don't turn out to be the next Amazon or Netflix. Various studies suggest that, on average, it's actually unprofitable to jump into IPOs, and that the better strategy is to give those fresh stocks a year or so to settle down as some such stocks don't even survive their first year. Overall, it's best to not jump into IPOs as you can do extremely well investing in stocks that have been around for a while and therefore have financial statements to study. One particularly powerful kind of stock to consider investing in is dividend-paying stocks. Still, interest in IPOs persists for good reason, so it's good to at least know what's coming and observe the exciting IPOs ahead.
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