December 29, 2020
If nothing else, 2020 was an outstanding year for initial public offerings with shares representing 481 companies trading on exchanges for the first time – a 20-year high. As the year wanes, it appears that many of the driving forces behind the hot IPO market will likely continue into 2021. Here are a few IPOs to watch in the coming year.
If you shop online, there is a good chance you have seen Affirm's logo during the checkout. Affirm processes payments for retailers who wish to offer their customers the chance to pay for purchases in installments. The company filed with the Securities and Exchange Commission in November 2020, planning to go public before year-end and later decided to postpone its IPO to 2021. Interest makes up about 37% of the company's revenue each year, which totaled $509.5 million in fiscal 2020.
The company is going acquisitive ahead of its planned IPO, with a recent announcement that it entered into a definitive agreement to acquire PayBright, one of Canada's leading buy-now-pay-later providers. In the deal, Affirm would acquire PayBright for approximately $340 million (Canadian).
CNN and other media outlets reported that the female-centered location-based dating app is planning a 2021 IPO. The Great Lockdown of 2020 led to a spike in dating app users, and Bumble was among those that benefited, reporting that users have grown from 22 million in 2017 to over 100 million this year. Match Group attempted to acquire the company in 2017 for $450 million, but Bumble's user base's growth has increased its value considerably since that time.
Bumble generated $300 million in revenue in 2019, with market research provider Statista reporting that Bumble is the second most popular dating app, topped only by Tinder. Besides the dating app, Bumble has two sister products: Bumble Bizz, a LinkedIn competitor and Bumble BFF, for matching with new platonic friends. The company's IPO is likely to happen early in 2021, with Bloomberg reporting management is seeking a valuation between $6-$8 billion.
Even people who prefer to do their shopping in person were suddenly looking at home delivery options as stay-at-home orders were put in place during the pandemic. For many people, that delivery option was Instacart. A gig economy play, the company partnered with over 500 retailers throughout the U.S. and Canada. While the company lost $25 million a month in 2019, it began recording profits during the pandemic, with April being its first profitable month.
At the current time, an initial public offering remains in the realm of rumor. However, CNBC and other outlets reported that the company had enlisted Goldman Sachs to help prepare for an IPO that values the company at approximately $30 billion.
With in-person contact risky, many have turned to locally-oriented social media app Nextdoor for interaction. The app allows users to report on local news, sell unwanted items and connect with neighbors. The app is currently live in 11 countries, more than 270,000 neighborhoods and one in four U.S. households. The company seeks a $4-$5 billion for its IPO. While Nextdoor has declined to share its revenue, it has raised significant amounts in venture capital funding, including $170 million last year.
The pandemic has resulted in an unprecedented level of pet adoptions and purchases as consumers spend more time at home. This created a boom in the U.S. pet industry, which was already booming. In fact, the American Pet Products Association (APPA), the leading trade association in the pet industry, reported that Americans spent $95.7 billion on their pets in 2019.
Pet retail giant Petco is planning to go public in 2021 with an IPO that will be worth as much as $800 million. Founded in 1965, the company has gone public three times. First in 1994, again in 2000 and 2002. It was acquired by a private equity group in 2006 and remained a private company since. Petco CEO Ron Coughlin says that the company has gone from a local veterinary supply shop to a disruptive, digital-led business. In its most recent fiscal year, the company generated $4.1 billion in sales.
Whether shares of these companies will end up as 2021's winners remains to be seen, but if the trends that fueled these industries in 2020 continue into the new year, then there is a chance the IPO boom may well result in many happy returns.
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