If you’ve been following any sort of business or tech news, then you know 2020 was a banner year for IPOs, and 2021 is following suit.
For companies on the path to IPO, it’s important to understand the broader market trends that you’ll likely be asked about. For example, how did the pandemic impact your IPO plans? Why did you or didn’t you take a traditional path to going public?
To help you prepare, we’ve summarized the top five trending IPO conversations covered by the media today.
1. The booming market, and why it’s so hot right now
New York Times reporter Erin Griffith tweeted that by January 22, 2020, four IPOs had raised $402 million. By the same time this year, we saw 82 IPOs raising $26.3 billion. This traction has only continued, with CNBC reporting that by March 30, 95 IPOs had taken place, when 218 new offerings had come to market.
Why are we seeing such a boom? Experts have speculated on a variety of reasons, but Bloomberg sums it up: “Unprecedented monetary and fiscal stimulus, ultra-low interest rates and – until recently at least – global markets at record levels helped fuel both traditional and SPAC listings, with issuers rushing to sell while investor demand is hot and valuations high. Stock prices have been underpinned by optimism that vaccines will tame the coronavirus pandemic, helping the economy to recover.”
This also begs the question: when will things taper off? Market volatility and inflation concerns, as well as the outcomes of hotly anticipated IPOs, will all play a role.
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2. Which sectors are seeing most traction
Headlining a strong year for tech IPOs, Snowflake became the biggest IPO for a U.S. software company in history. This activity drove media conversations around cloud software, as well as specific markets like fintech – led by the anticipated Robinhood IPO. PAN led one of its own fintech clients, payments provider Payoneer, through a SPAC merger. Edtech is another sector with more anticipated exits this year too.
As healthcare took front stage in 2020, it was no surprise to see seven digital health companies go public, including telemedicine company Amwell and online pharmacy GoodRX.
A venture capitalist’s outlook on healthcare technology. Michael Greeley, General Partner at Flare Capital Partners, shares his perspective.
3. The impact of the pandemic
In addition to the industries noted above, companies in industries that are poised for accelerated growth due to the pandemic are up for potential exits.
With the rapid shift to online working, shopping, education and more, investors see value in cloud-based software. In fact, the value of public cloud companies more than doubled to $2T during the pandemic, according to the BVP Nasdaq Emerging Cloud Index.
Beyond Snowflake headlining cloud software IPOs, there were several others – including Asana, Sumo Logic, and JFrog. Robotic process automation (RPA) company UiPath also benefited from this shift – capitalizing on the trend of organizations looking to transform and adapt faster than ever before.
4. Non-traditional paths like SPACs and direct listings
Beyond the boom in IPOs, we’re also seeing a rise in some non-traditional paths like direct listings and lots of Special Acquisition Companies, known as SPACs. An Insider headline details that “219 ‘blank-check’ companies raised $73 billion in 2020, outpacing traditional IPOs to make this the year of the SPAC, according to Goldman Sachs.”
But 2020 didn’t know what would be in store for 2021. SPACs in the U.S. have raised $87.9 billion so far this year – as of March 19, exceeding 2020’s total, according to SPAC research cited by CNBC. An article anticipating 2021 to be the year for healthcare SPACS points to the benefit of this approach as the reason for their meteoric rise: an alternative for navigating a path to the public markets without with the lengthy, complex IPO process. Many believe, however, this rise to fame might be short-lived, as many SPACs have been more vulnerable to market volatility.
Direct listings are another approach, which can help to avoid large fees from investment bankers while also alleviating the concern of investment banks underpricing stocks. They’re not as common, but were popularized by Spotify and Palantir. We may soon see more companies considering a direct listing, after the SEC approved a new type this past December. Previously, companies could only use direct listings to sell existing shares. But now they can also issue new shares and sell them to public investors in a single transaction on the first day of trading – making this a more attractive alternative.
5. The increasingly important role of DEI
Diversity, equity & inclusion (DEI) has been a major topic of focus across industries, especially over the past year. This was no exception for the IPO market. In fact, Goldman Sachs took a stand that it would no longer take a company public unless it has at least one woman or non-white board member. The investment bank’s new rule will require at least one diverse board member to start with, but then require two by 2021.
NASDAQ is also looking to require listed companies to either have diverse boards or explain their lack of diversity in a statement. The SEC is currently delayed on this ruling.
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These are just a few of the trending topics reporters could ask about, and you won’t want to be caught off-guard. In addition to preparing reactive responses to potential questions, you may also want to proactively weave key messages into your talking points, owned content and presentations that map back to some of these trends, where it’s strategic to do so.
While many of these topics have been covered heavily by the media over the past year, the conversation is changing rapidly – just as we saw with the Goldman Sachs guideline, the SEC direct listing approval, and the anticipated ruling on NASDAQ’s request. As these conversations continue to evolve, we’ll be reading and readying our clients for their next stage of growth.
