In Focus: IPOs 2021
The IPO market was red hot in 2020, even with a global pandemic. This was not what many people expected when social distancing and nationwide lockdowns occurred, but that actually helped some tech companies.
The pandemic exposed America, and the rest of the world's weak digital infrastructure. Public companies, that were already attacking the digital infrastructure problem flourished during the chaos, think Zoom (ZM), UpWork (UPWK), Fiverr (FVRR), Datadog (DDOG), Logitech (LOGI), Cloudflare (NET), AWS (AMZN) and other cloud services. IPOs that looked dead in the water at the beginning of the pandemic were being anxiously awaited on to go public by the summer, especially if those companies provided offerings that strengthened the digital infrastructure, think Snowflake (SNOW), Palantir (PLTR), JFrog (FROG), Rackspace (RXT), and Lemonade (LMND).
The time working away from the office gave CEOs and CTOs new insight into what a company that can operate under any circumstance should look like, and many tech companies were the beneficiary of the super speed digital transformation that company CEOs had to make happen in order for their companies to keep doing business.
2020 Wasn't for Everyone
There were companies that were slated to go public last year that didn't make their way to the markets. Companies like Robinhood and InstaCart made the IPO watch list in 2020, Robinhood also made the list in 2019.
Robinhood seemed primed to go public in Q2 of 2020. The company received tons of free press from news outlets covering the trend of people stuck at home taking their stimulus checks, trading on the platform, and actually making money. But the good times last but so long. A young trader, who was using the Robinhood platform to trade options, misunderstood his balance and committed suicide after believing he was in the red for nearly a million dollars. The death brought a sad end to the Robinhood hype, and probably caused them to push back their IPO.
But in 2021, there's no denying that Robinhood is the finance app of a generation. It ranks high on my list of IPOs to look out for in 2021. There's also Stripe, which handles payment options for websites like this and many others. E-commerce has been running hot for more than a decade, the pandemic provided an unexpected shot of nitrous to almost everything e-commerce related. The current atmosphere couldn't be better for Stripe, and because of this the company remains high on our watch list.
Coinbase is planning to go public! The news of this started to circulate around summer of 2020, and because some folks in investment related media still think of Bitcoin as a joke, they covered the Coinbase story with an undertone of skepticism. Bitcoin recently traded above $40,000, proving the skeptics wrong, again.
We're more than a decade into Bitcoin, it's here to stay, cryptocurrencies are here to stay. Coinbase could be the unofficial digital marketplace and exchange for all things crypto. This company is also high on my list.
AppLovin, there are reports that AppLovin is a profitable company, which is not normally the case for tech companies going public. AppLovin helps mobile app developers publish and promote their apps. It's another company high on my 2021 IPO list.
The 2021 IPO Excitement
I'm more excited for the 2021 IPO list than I was for the 2020 IPO list, which you can read about here. In 2020, I thought there was a lot of value in the underperforming IPOs from 2019 that made me want to put money in places like Uber, Datadog, and Slack while they were cheap. Later in the year I did update my thoughts on Palantir and AirBnb and advised anyone who would listen to go all in on both if they could. But many of the major IPOs of 2020 have been bid up, and I haven't found anything yet that screams value buy.
Some of the stocks on the 2021 IPO list that I think could be big sleepers are Nextdoor and Bumble. The attack on the U.S. Capitol has put Twitter (TWTR) and Facebook (FB) in the spotlight again, with some saying both platforms played a part in amplifying the voices that fanned the flames of the attack. But businesses large and small still rely on Facebook to get their product in front of potential customers. Facebook's reach is too large for advertisers to ignore, no matter what goes on on the platform. Maybe Bumble and Nextdoor can be better options for advertisers in the future.
Be warned, the IPO giveth and the IPO taketh away, all IPOs aren't rainmakers. Some are showered with hype, but are duds when they hit the market. Snap (SNAP) went public at $17 per share, and within two days of being publicly traded, the stock traded up to $29.44. The stock sold off three days after going public and it took the much hyped Snap more than three years to trade back to $29. The IPO market is still a very speculative market so investors beware.