IPO Frenzy Continues

The strongest IPO market in more than 20 years keeps pace.

On Wednesday (Jan 13), the fintech Affirm debuted as a public company, and its shares jumped almost 100%. 

The next day the online clothing reseller Poshmark skyrocketed more than 140% following its IPO, while the pet care retailer Petco scored 63%.

All three initial public offering prices were above forecasts, indicating a solid investor’s appetite in the stock market.

Other smaller companies also went public already this year and also were priced above the range target. This is the case, for instance, of the biotech companies Cullinan Oncology and Gracell.

2020 was the busiest IPO market since 1999 despite the pandemic. It rebounded after the first wave of the coronavirus. In the fourth quarter, $67.3 billion was raised, six times the total from January to March.

According to Dealogic, 456 IPOs raised $167.4 billion as of Dec. 24 in the U.S., compared to $62.5 billion collected by 211 companies for the same period in 2019.

In 1999, during the dot.com bubble, 547 offerings raised $107.9 billion.

Some investors say it’s hard to tell if we are in the middle of an IPO bubble or if the high demand is a tangible consequence of the low-interest rates, which have made investors open to take more risk, driving the stock market boom.

“High growth, net-loss companies and other start-ups that never would have been viable IPO candidates in prior years, all of a sudden had investors willing to throw money at them that perhaps would only have been available previously in the private markets and at less desirable valuations,” Christina Roupas, a partner and co-chair of capital markets at law firm Winston & Strawn, said in an interview to Barron’s. 

She highlighted public markets have been rewarding growth over profitability.

Several well-known companies are anticipated to go public in 2021, including Bumble, Roblox, Robinhood, Instacart, Nextdoor, Oscar Health, and Coinbase.