A bumper year for IPOs

Darren Sinden

Though the NYSE had the largest IPO in the shape of Bill Ackman’s SPAC Pershing Square Tontine Holdings which attracted $4.0 billion

NYSE

Against all the odds 2020 has turned out to be a bumper year for IPOs with tech names featuring highly in the line up of stock market debutants.

Companies listing on the NYSE for the first time in 2020, through an IPO, raised a total of $81.80 billion. Making 2020 the busiest year on record for IPOs on the exchange.

The rival Nasdaq also had the best year in IPO terms that it has seen for a decade with 179 companies listing on Nasdaq over 2020 to date. The technology-focused marketplace has a string of billion-dollar tombstones to prove it including:

Airbnb which raised $3.49 billion, Royalty Pharma, who raised $2.17 billion, Warner Music Group raised $1.92 billion and Eastern Bankshares who raised $1.79 billion. Maravai Lifesciences that raised $1.62 billion, Reynolds Consumer Products were able to raise $1.22 billion, GoodRx raised $1.14 billion and Wish raised $1.10 billion.

Though the NYSE had the largest IPO in the shape of Bill Ackman’s SPAC Pershing Square Tontine Holdings which attracted $4.0 billion. Other high profile IPOs on the NYSE included DoorDash and Snowflake which was one of the biggest technology IPOs in history raising $3.90 billion for the cloud storage firm.

Though it was run close by C3.AI which debuted in December the IPO valued the company at $4.0 billion based on the $42 IPO price, however, the shares in the AI specialist rose in value by 143% on its first day of trading taking its market cap to almost $10.0 billion.

Deals such as Snowflake and C3.AI were thought to be dead in the water in March and April but the way that the markets rallied off of their lows. Moving out of the bear market to make new all-time highs defied expectations and left investors hungry for new tech-related investment opportunities.

CNBC quoted C3.AI founder and CEO Tom Siebel as saying that: “no way, no how.” “If we look back at February, March, April, I thought capital markets would be closed for a long time,” he added that “Like the recessions we saw in 1980, 1990 and 2008, I thought this was something that would last for some years, but nobody could have anticipated the extent of fiscal and monetary stimulus that turned this around.”

Competition for new equity issues has heated up as well, the NYSE and the Nasdaq have always competed to attract IPOs however they now face a new threat from within with the increasing popularity of SPACs. True the exchanges do get a new listing when a SPAC is bought forward to the market.

However, they tend to be more low key affairs than publicity-hungry IPOs and when a company reverses into one of the listed shells it tends already be a fait accompli with the listing little more than a formality.

Tech names that are lining up an IPO in 2021 include Databricks a data science and machine learning company headquartered in San Francisco, that has raised $897.4 million in VC funding and is valued at $6.20 billion. Another IPO hopeful is New York-based UiPath which specialises in machine learning and robotics. Uipath has raised $977.20 million and is valued at $7.10 billion. Both of these businesses could really resonate with IPO investors and fund managers alike.

2020 was probably a one-off in terms of the combination of factors that drove markets higher and reignited the interest in IPOs but the flame is likely to continue to burn in 2021 though perhaps not quite so vigorously.

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