After a huge slump that lasted several decades, the IPO market appears to be back with a bang. Despite the formidable obstacles posed by the COVID-19 pandemic, the year 2020 proved to be a major turning point for the IPO market. Last year, 471 U.S. companies (including SPACs) went public, representing a level last seen in 1999 at the height of the Dotcom boom.
Another encouraging trend: The average first-day return, commonly called an “IPO Pop,” more than doubled over the longer-run average to 38%.
That means first-day returns in 2020 were much stronger than the average IPO pop from 1980 through 2020 at 18.4%, though not quite as large as the Dot-Com bubble, where IPOs averaged over a 60% increase on the first trading day.
And the good times could be here to stay.
With markets awash with liquidity, the first quarter of the current quarter has set the pace for yet another record year for IPOs in the U.S. and globally.
That comes as a breath of fresh air after years of lackluster activity.
For years, the proportion of U.S. companies that choose to go public has plummeted mainly due to increasing red tape including growing regulatory and disclosure costs as well as laws such as the Sarbanes-Oxley Act of 2002 (SOX) that was enacted to protect investors from possible fraudulent activities by corporations.
With half of 2021 now gone, some of the most hotly anticipated IPOs are still waiting to play out. Here are some high-profile IPOs to keep an eye on bearing in mind that popular, big deals tend to enjoy the biggest IPO-pops.
#1. Krispy Kreme
In its second run as a public company, Krispy Kreme (Pending:DNUT) has announced plans to offer 26,666,667 shares of its common stock in the company's upcoming initial public offering.
DNUT shares are expected to be priced between $21.00 and $24.00 per share, with the company hoping to raise about $600M at the midpoint of the range thus giving the company a valuation of ~$3.8B.
Krispy Kreme believes it has one of the largest and most passionate consumer followings in the retail world today as exemplified by the 38B total media impressions generated by the company last year. Krispy Kreme also thinks market conditions will remain "highly favorable" as global consumers’ long-standing demand for quality indulgence continues to grow.
Krispy Kreme generated $1.122B in FY20, adjusted EBITDA of $145.4M and adjusted net income of $42.3M. The company will list shares on the NASDAQ Global Select Market, becoming the first IPO in the restaurant sector since Kura Sushi (NASDAQ:KRUS) went public in 2019.
But in keeping with the trend of the last decade, online and tech IPOs have generally been hotter than retail ones.
Stripe (Private:STRIP),an online payment processing platform for internet businesses, takes the cake as the unicorn of all unicorns. Stripe boasts several high-profile customers including Amazon (NASDAQ:AMZN), Instacart, Salesforce (NYSE:CRM) and Lyft (NASDAQ:LYFT).
Back in March, the FT reported that the latest funding round by the payment processor valued the company at a staggering $95B, potentially making it the most expensive U.S. startup ever.
That’s nearly triple the $36B valuation Stripe secured last April during another round of funding, when it raised another $600M from high-profile VC firms such as Sequoia Capital and Andreessen Horowitz.
Famous activist investor Bill Ackmann has trained his sights on the Silicon Valley company as one of the companies he wants to bring public via his SPAC vehicle, Pershing Square Tontine Holdings (NYSE:PSTH.U).
Instacart’s is another potential blockbuster IPO that could happen in the current year.
Instacart (Private:ICART) is a popular and widely available grocery delivery service in the United States and Canada that allows you to order groceries from local grocery stores through the Instacart app or website and have them delivered to your door in as little as 2 hours.
Last year, Reuters reported that Instacart had enlisted the services of Goldman Sachs as it got ready to go public. That could happen as early as this year at a valuation of roughly $29 billion, though there are rumors that Wall Street could value the company at as high as $50 billion.
Instacart has benefited from the stay-at-home dynamic ushered in by the global pandemic. However, the company’s model could come under pressure with the Biden administration planning to block a regulation that would have made it easier to classify gig workers as independent contractors. Other companies that are likely to be negatively impacted by the gig worker rule are DoorDash (NYSE:DASH), Grubhub, Uber (NYSE:UBER) and Lyft.
By Michael Kern for Safehaven.com