• Franek Chiniewicz

IPO Watch: The Top Five on the Watchlist this Quarter

Despite the Covid-19 pandemic showing few signs of slowing, new variants of the virus spreading, and lockdowns being extended, equity markets have remained unfazed in early 2021. Companies raised a record $64bn via IPOs and SEOs in the first three weeks of 2021 alone, with the total volume of equity raised standing at double the amount during the same period last year.

The two largest IPOs of 2021 were by mobile game company Playtika and fintech Affirm, with both companies’ shares increasing in value since their IPOs. IPO activity is expected to remain high in the coming months as firms rush to go public to profit from the high – and rising – equity valuations globally. Given the unprecedented levels of fiscal and monetary stimulus pumping liquidity into the markets, this trend is likely to continue. Below is a round-up of the top 5 IPOs/direct listings to watch in early 2021.

1. Robinhood

Robinhood – by now a household name – is a financial services company that caters primarily to retail investors. It generates revenue from three main sources: margin lending, the sale of client order information to high-frequency traders, and the interest earned on clients’ deposits. It has enjoyed unprecedented user and revenue growth in 2020, largely due to the increase in retail trading activity spurred by pandemic lockdowns. The most recent financing round in September 2020 valued the company at $12 billion, although Robinhood may now be aiming for a valuation of up to $20 billion following increased activity on the platform in recent months.

Recent developments may delay Robinhood’s IPO plans, however. The company has attracted regulatory scrutiny following its decision on January 28 to restrict clients’ ability to buy several highly volatile stocks (most notably GameStop). Many users expressed their disappointment in the broker, while Senator Ted Cruz and Representative Alexandria Ocasio-Cortez called for an investigation into the matter.

According to reports, Robinhood’s IPO will be led by Goldman Sachs and is expected in Q1 2021.

2. Coinbase

Coinbase is the largest cryptocurrency exchange by trading volume in the US. Following months of speculation, Coinbase announced on January 28 that it will go public via direct listing – avoiding the fees it would have to pay to investment banks if it were to go public through an IPO. The listing will be a noteworthy test for the cryptocurrency world, with other crypto brokers likely to follow if Coinbase’s listing proves successful.

The most recent funding round in 2018 valued Coinbase at $8 billion. However, following the recent resurgence in traders’ interest in cryptocurrencies and the value of the cryptocurrency market surging above $1 trillion, the 2018 price is of little relevance. Some estimates now price Coinbase at as much as $75 billion, guaranteeing it a position as one of the largest upcoming equity offerings.

The direct listing is expected to take place in late February/early March.

3. Instacart

Instacart operates a grocery delivery and pick-up service in the US and Canada. In 2020, due to the pandemic-induced surge in demand for online grocery shopping, Instacart has become one of the most valuable private companies in the US. According to Instacart CEO Apoorva Mehta, transaction volume increased by 300% in December year-over-year. The company was valued at $17.7 billion in its most recent fundraising round but could now be worth as much as $30 billion.

Goldman Sachs is reported to lead the IPO, which is expected to take place in early 2021.

4. UiPath

UiPath is a New York City software development company that uses artificial intelligence to build software robots that can automate back-office, time-consuming tasks. The company seeks to take advantage of the frenzied IPO market and mimic the successful tech IPOs of DoorDash, Airbnb, and Snowflake, all of which debuted in 2020. UiPath was most recently valued at $10 billion in a funding round in July, but Bloomberg reports the company could now be priced at over $20 billion.

UiPath confidentially filed for IPO in December, which is expected in the first half of 2021.

5. Bumble

Bumble, backed by Blackstone Group, is a dating app with over 40 million monthly users. It distinguishes itself from its competition by being a “women-first” daring app, where only women can make the first move to match with a potential partner. The dating app is seeking a valuation of up to $8 billion as it attempts to take on Match Group, the dominant player in the market, which controls Tinder, OkCupid, Match.com, and Hinge.

The lead underwriters on the deal are Goldman Sachs and Citigroup.

Bumble filed for a Nasdaq IPO on January 15 and is expected to go public sometime in February.