Four hundred and eighty. That’s the number of new IPOs to hit the U.S. stock market in 2020 which represents a 105% increase from the number of companies that went public in 2019. This past year has been a momentous one for the IPO market as investors looked to add shares of up and coming companies with new and unique business models.
While many contributing factors could be causing the boom in IPO activity, the truth is that these companies wouldn’t be going public if there wasn’t such high demand from investors. Don’t expect that heavy demand to die down anytime soon.
While IPO investing can be a tricky endeavor and many of the companies that debuted this year haven’t lived up to their initial expectations, that doesn’t mean that you should overlook the IPO market in 2021. 3 companies going public next year stand out in a crowded IPO market, which is why we’ve put together a brief overview of each one below.
Coinbase
Cryptocurrencies like Bitcoin have had a banner year in 2020, which is why a company like Coinbase could be one of the biggest IPOs of 2021. It’s a company that provides a secure online platform for buying, selling, transferring, and storing digital currency. Since Coinbase offers an application that makes it easy for anyone interested in trading digital currencies to handle their transactions, the company has boosted its user base to new heights as cryptocurrencies like Bitcoin regularly hit new all-time highs this year. The IPO offering is the only pure-play for investors that are interested in exposure to cryptocurrencies in public markets, which is a big reason why it’s worth monitoring going forward.
It doesn’t matter what you think will happen to the prices of certain cryptocurrencies going forward, these digital currencies are here to stay. People will need a way to handle cryptocurrency transactions in a safe, secure, and convenient way. Since Coinbase is the largest and most popular digital currency exchange platform in the world, it’s easy to see why it could be a big winner. With over $25 billion in assets on the platform and 35 million investors across 100 countries, it’s clear that Coinbase is a major player in the industry. The company submitted a confidential S-1 filing to the SEC on December 17th, although an official IPO date has not been confirmed.
Affirm Holdings
Anytime you have a company that could potentially disrupt an entire industry, it’s worth paying attention to. Affirm Holdings is doing just that as it offers a unique service that might change the entire credit card industry. The fintech company offers consumers the option to make purchases without incurring interest if they qualify and also provides “simple-interest” loans. Affirm generates revenue by collecting fees from merchants after it helps them to make a sale. It also collects interest from fixed amounts if consumers don’t qualify for the 0% APR financing option. What’s even more interesting is that Affirm doesn’t charge late fees or penalties on the loans.
The company was founded by Max Levchin, one of PayPal's (NASDAQ:PYPL) cofounders, which tells us that a lack of experience in the fintech space is not a problem here. A major competitive advantage for Affirm is the fact that it uses artificial intelligence and a cutting-edge risk model to help manage lending risks. The company saw its FY 2020 revenue increase by 93% year-over-year to $509.5 million, although the company is still unprofitable. While no official IPO date has been announced, investors should anticipate that the company will go public during the first half of 2021.
Robinhood
Last on our list of IPOs to watch in 2021 is Robinhood, a company that completely changed the entire landscape of the investing world. Robinhood was the first brokerage to offer a commission-free trading platform and has built a loyal investing community mostly comprising of younger investors. While most major brokerages now offer commission-free trading, the Robinhood IPO is still worth keeping an eye on for several reasons.
First, you have Robinhood’s valuation, which is estimated to be $20 billion. That figure would make it one of the biggest IPOs of the year. There’s also the fact that the company has over 13 million users and continues to grow its client base at a rapid pace. It might end up being the premier brokerage for younger investors, especially thanks to its user-friendly interface. The company has selected Goldman Sachs as the lead underwriter, so keep an eye out for further details as we get deeper into the new year.