While COVID, the Stock Markets and yes, the election, can claim the most headlines this year, a lesser known headline is playing itself out in 2020, namely the resurgence of IPO's or Intitial Public Offerings with huge gains out of the gate. A cousin of this trend is the emergence of SPAC's (special purpose acquisition companies) which we will touch on more in a future blog article.
AirBnB debuted today as the biggest IPO of 2020. It ended up offering 52 million shares for sale at $68 each which was significantly above their December 1st target of around $44 to $50 per share. The shares (ABNB) started trading on the Nasdaq today at $146 per share rising to $160 per share valuing AirBnB at more than $110 billion. That is 12.5% of the total value of IPO's this year which have included DoorDash (DASH), Palantir Technologies (PLTR), Asana (ASAN) and others.
Yesterday, DoorDash (DASH) Pre-IPO shares which had sold at $102 a share, debuted it's first trading day at $182 per share rising to over $195 valuing the group at over 70 Billion dollars. These are lofty valuations for companies yet to turn a profit. If you are investing for quick profits you better have a clear game plan form the outset.
An important question to ask, is whether these valuations make sense to you based on the mid to long term outlooks for these companies. That means you need to carefully assess the risks, competition and macro economic conditions going forward. If you were able to get into these companies long before their IPO date, your risks and profits are of an entirley different magnitude. Gains of 1,000 to 20,000 percent are not uncommon for early investors. Of course, such investor placements are typically reserved for VC's and accredited angel Investors. While this is changing with new laws and crowdfunding platforms such as WeFunder making investment in the very early stages of a companies development accessible to ordinary investors, the risks are still substantial. Only a small percentage of companies make it to the IPO stage.
Another way for individual investros to play this trend in a more diversifed manner is in an ETF fund such as the Renaissance Capital IPO ETF
It is worth noting that 21 out of the 22 technology IPOs this year have gone above their official listing price this year on the first day of trading. 2020 has had more billion-dollar IPOs than any other year in history. More IPO's making their debut's in 2020 are Wish, Roblox and Affirm. It's fair to say that IPO mania is back and we can expect this trend to continue into 2021.