In Focus: The IPO Bargains of 2021
Every year, at the beginning of the year I put together a list of private companies that Wall Street is patiently waiting on to go public. Above is a list of companies we expected to go public in 2021.
Out of the 12 companies on the list, only five have not gone public yet, Stripe, InstaCart, Nextdoor, Ant Financial, and ThoughtSpot. Of the seven that have gone public, it's been a rocky start to life as a public company. The CEOs of these public companies have learned that the people who applauded you for building a billion dollar private enterprise, are the same people that criticize you now for your stagnant stock price.
It's quite funny actually, and I can laugh because I'm not one of these CEOs, but as private companies these CEOs are told they're doing every right, but when they're companies become public, and the stock price isn't moving north, they're asked when are they going to do something right to move the stock. Nuts!
It hasn't been all bad, the companies raised the money they needed to raise, the CEOs were crowned billionaires, and some investors made money.
The fintech Affirm (AFRM) went public in early January at $49 per share. The stock hit the open market at $90 a share and traded to over $135 per share three weeks after the IPO. Since then it's been in a slow decline and currently trades at $67.17. If you were lucky enough to get a piece of the IPO you're winning, if you bought in at $90 or above, you may feel like you got duped by the IPO hype. Affirm recently signed a deal with Apple which will allow Canadians to buy Apple products now and pay later with limited interest.
Petco (WOOF) also went public in early January at $18 per share. Petco also jumped out of the gates hot, hitting the public market at $26 a share and trading up to $31 per share on the same day. The stock would never see $31 again, since its opening day the stock has paced lower and now sits at $19.97
per share. From a review of the daily chart, the stock seems to find support around the $17 area. It traded down to $17 in early March and was quickly bought up, it traded back to $17 in July and again was bought up by investors. It appears to be headed back to $17. Will the buyers come out again?
I had high hopes for the dating app Bumble (BMBL), which went public in early February at $43 per share. Bumble's market debut was a rocky one. After hitting the open market at $76 a share, the stock closed down on the day at $70.31. It rallied the next day and traded to over $80 per share, and after that the stock would start trading downwards, hitting a low of $39.04 in May. Since hitting its May low the stock has rallied and is trading at $48.78. There's a lot of good news coming out of Bumble, the company gave its employees a week off to de-stress (a move I think will pay big dividends in the future). The company plans to open Bumble Brew, a NYC cafe that will help people with dating off-app, and Bloomberg recently published a report that a record number of Americans used a dating app in July. Things are lining up for Bumble.
Oscar Health (OSCR) was supposed to help give the old and boring healthcare industry a tech makeover. The company went public at $39 per share, and for all of the pre-IPO hype, the offering wasn't highly subscribed to by the market. In the IPOs discussed so far, they all hit the market above their IPO price, Oscar Health hit the open market at $36 per share. The stock would rally shortly after its IPO to $37 per share, but then the buying stopped and the selling started, and it now trades for $15.15. Even though it's current valuation is over $1 billion, no one is celebrating.
AppLovin (APP) priced its IPO at $80 per share and similar to Oscar Health hit the market below the IPO price and closed at $65.20 on the day of its IPO. The IPO occurred on April 15, and in the weeks following the IPO the stock would trade down, until it found its bottom at $49.87 in May. After hitting the low the stock rallied and eventually hit $90 per share. The stock has since cooled off and now trades at $58.65. AppLovin helps mobile app developers market and monetize their apps. This was a company that I was looking forward too, and I feel a lot of AppLovin's negative stock performance post IPO had a lot to do with Roblox (RBLX), which went a public a month before AppLovin and took a lot of attention away from AppLovin.
Crypto exchange Coinbase (COIN) was a company I was looking forward to seeing become a public enterprise. Coinbase priced its direct listing at $250. The stock went public on April 14, 2021 and traded to a high of $429 on the day of its IPO, but since then it's been a slow slide downward. The stock currently trades slightly above its IPO price.
Last there is stock trading platform Robinhood (HOOD), which went public on July 29, 2021 at $38 per share. The first two days as a public company weren't great for Robinhood, but after getting a weekend to think about it, investors entered last week on a mission to accumulate Robinhood. The stock traded to over $80 per share as investors piled into the stock. Since hitting $85 the stock has sold off and currently sits at $55.01.
If you're an investor who bought into the pre-IPO hype of these companies and bought in on the first day it's not looking good for you. For me however, this is where I like to shop, in the IPO bargain basement.
I like Affirm because I love the fintech space and believe there are areas within the industry for companies besides PayPal (PYPL) and Square (SQ) to make their mark. I like Bumble because the CEO is young, has executive experience from her days at Tinder, and is trying to create a better culture around work while also building her business. I strongly believe Bumble's best days are ahead of it post pandemic.
If AppLovin were to take another dip I would be excited to get involved in that as well. The mobile app space looks like it's going to be around for a while, and investing in a company that helps developers monetize and market their mobile apps seems like a win at the right price.
I wrote about the Coinbase IPO back in March, the company ended up opting for a direct listing over a traditional IPO. I like the company more today than I did in March, but I haven't purchased a share of the company yet. The reason I have not taken a bite of Coinbase is because I'm completely comfortable investing in crypto currencies, so I don't feel the need to make a crypto investment by proxy using Coinbase, but for anyone who isn't comfortable researching and investing in cryptocurrencies directly, Coinbase is the answer, as crypto prices rise so will Coinbase.
I wrote about Robinhood (HOOD) last week, you can read that here. Like Affirm, Robinhood is a fintech company with room to grow and lots of markets to pursue. I think we're in the early stages of what Robinhood could be, and any chance to invest in it cheaply I'll gladly take.
They Don't All Lead to Riches
This list of names doesn't represent every IPO of 2021 to date, what this list represents are the companies that Wall Street deemed to be the best-of-the-best private companies coming into 2021. Crunchbase has an extensive list of this year's IPOs found here.
Wall Street at times sells this dream that an IPO is an investors quickest way to going from outhouse to penthouse, but as you can see, it isn't. Rarely do we see cases like Beyond Meat (BYND) and Zoom (ZM) where the company goes public and the stock keeps heading north. What you're seeing today with this list is the reality of IPOs, they get hyped as private enterprises, they go public, the venture capitalists who have had their money tied up in the company for years sell their shares as soon as they can to create liquidity for their firms, outsiders see big selling and question whether or not they should buy, the stock price drops, bargain hunters like myself buy the stock below its IPO price and enjoy the companies success. Beware of the dream that Wall Street tries to sell you about IPOs, they don't all lead to riches, most of them lead to heartache.