Instacart, Affirm Lead 2021 IPO Candidates
Connected-economy companies led 2020’s surprisingly successful roster of U.S. initial public offerings, with hot firms like Airbnb and DoorDash going public at valuations that collectively topped $120 billion.
Many enjoyed huge first-day price pops, heating up the IPO market even more — and 2021 seems poised to only continue the fireworks.
Here are some of the most important connected-economy IPOs expected in 2021, listed in order of either their last publicly estimated or confirmed valuation or published reports indicating what a company expects its value at IPO to be:
Instacart ($30 Billion)
Grocery delivery app Instacart reportedly recently chose Goldman Sachs to lead its upcoming IPO.
Reuters quoted unnamed sources as saying the offering would occur in early 2021, valuing the company at about $30 billion.
Although it has yet to file an S-1, Instacart has seen its business boom during the pandemic as millions of consumers tapped into delivery services to buy their groceries. It’s also been expanding beyond groceries to handle other types of deliveries, cutting deals with Best Buy, Sephora and other merchants.
Instacart’s initial public offering will come in the wake of rival delivery firm DoorDash’s wildly successful IPO earlier this month. DoorDash originally expected to price its stock at $90 to $95, but ultimately sold shares at $102. Then shares soared 85.8 percent to $158.22 on their first trading day.
Robinhood ($20 Billion+)
Popular stock-trading app Robinhood Markets reportedly recently hired Goldman Sachs to lead a possible 2021 IPO that would value the company at more than $20 billion.
Robinhood offers an easy-to-use app to trade stocks commission-free, making the company popular with millennials. It currently has about 13 million users, including some 3 million who only signed up this year during a pandemic that’s forced many people to stay at home and look for something to do.
But despite such popularity, Robinhood has generated plenty of controversy. For example, some Wall Street pros attribute big run-ups in stocks like Tesla partly to a “Robinhood effect” — inexperienced Robinhood customers buying tech stocks whose products they’re familiar with, but without regard for a company’s business fundamentals.
Massachusetts securities regulators recently sued the company, alleging that it exposes investors to “unnecessary trading risks” and prompts inexperienced investors to trade frequently through the “gamification” of stock-market investing.
Robinhood denied the charges, but recently agreed to pay $65 million to settle U.S. Securities and Exchange Commission allegations that it failed for several years to disclose so-called “payments for order flow.” That’s where high-speed trading firms pay brokerages for the privilege of executing customers’ buy and sell orders, sometimes for worse prices than usual.
Robinhood paid the settlement, but neither admitted nor denied any wrongdoing.
Affirm (About $10 Billion)
Affirm Holdings, which specializes in buy now, pay later (BNPL) financing, filed for an IPO that was initially expected to take place this month, but the firm reportedly pushed that off until 2021 at the 11th hour.
The Wall Street Journal cited unnamed sources as saying that Affirm might have postponed the IPO to avoid the big first-day “pops” that Airbnb and DoorDash saw when they went public.
Such big gains are great news for investors who either have pre-IPO shares or buy a stock early on its first day before prices rise, but the gains don’t actually net the underlying companies any extra money. In fact, big pops mostly just mean that underwriters priced an IPO’s stock too low.
The Journal said Affirm is not only delaying its IPO to reduce the odds of such a pop, but might also increase the number of shares offered. That should reduce a pop due to the law of supply and demand, or at least let the company raise more money by selling a greater supply of shares at a time when IPOs are hot.
Affirm reported improving finances in its S-1 filing as BNPL’s popularity soars. The company said revenues nearly doubled year over year during Q3 to reach $174 million, up from $87.9 million a year earlier. That helped Affirm cut its losses more than in half to $15.3 million, down from $30.8 million in the same 2019 period.
“We try first and foremost be on the consumer’s side and give them a clear idea of what they can spend. What is a safe amount of money for you to spend and borrow?” Affirm CEO and Co-Founder Max Levchin — a co-founder of PayPal — told PYMNTS CEO Karen Webster in an interview last year.
Coinbase ($8 Billion+)
Cryptocurrencies are hot and bitcoin has soared more than nearly 600 percent in recent months to trade at or near all-time highs, making this a strong moment for leading U.S. crypto exchange Coinbase to go public.
Coinbase announced earlier this month that it confidentially filed for an IPO, with many market watchers expecting the stock to begin trading some time in 2021.
Coinbase has more than 35 million users, $25 billion of assets on the platform and total crypto trading volume exceeding $320 billion.
Although the company has yet to release its S-1 or provide any further details, the filing comes at a time when cryptos are crushing it. Bitcoin hit an all-time intraday high of 28,288.84 just this past Sunday, up 589 percent from an intraday low of $4,106.98 on March 13.
Coinbase last reported a valuation of more than $8 billion as of October 2018, when it raised $300 million in a Series E round led by Tiger Global Management, with participation from Wellington Management, Andreessen Horowitz and other firms.
“We strive to be the easy, trusted way for anyone to get started with cryptocurrencies,” the company said at the time. “We see Coinbase’s growth as validation that the ecosystem will only continue to grow in size, influence and impact — ultimately ushering in a more open financial system for the world.”
Petco ($6 Billion)
Petco hopes “third time’s the charm” when it comes to going public. The pet supply giant, which traded on the stock market twice in the past before leveraged buyouts, recently filed to go public for the third time in company history.
Bloomberg reported that the upcoming IPO will likely value Petco at about $6 billion including debt.
In addition to operating some 1,500 U.S. and Mexican brick-and-mortar stores, the company this year redesigned Petco.com and the Petco app “to support digital-first health and wellness resources and solutions for pets and pet parents,” according to the firm. Petco said the upgrades include a focus on curbside pickup, same-day delivery, online appointment booking for veterinary care and more.
The company said in its S-1 filing that it’s invested more than $300 million “to build out leading capabilities across e-commerce and digital, owned brands, data analytics and a full suite of on-site services including veterinary care.”
Surprisingly, the pandemic has actually boosted Petco’s business as many housebound Americans get pets. The company wrote in its S-1 that industry estimates the share of U.S. households with pets will rise 4 percent in 2020, creating $4 billion in fresh demand for pet products.
In fact, Petco’s net sales actually rose 9 percent year on year during 2020’s first 10 months despite COVID-19 closures, reaching $3.6 billion from $3.3 billion in the same 2019 period. Petco also cut its net losses to $24.8 million during 2020’s first 10 months, down 73.4 percent from the $94 million of red ink that the company racked up during the same period last year.
Rival online pet supply firm Chewy staged a successful IPO last year. Chewy priced its shares at $22 a share in June 2019, but the stock closed on Tuesday (Dec. 29) at $90.92, up 313 percent since the initial offering.
Roblox ($4 Billion)
Online games platform Roblox recently pushed its planned initial public offering from 2020 to 2021 after Airbnb and DoorDash’s big first-day pops convinced management that an overheated IPO would mostly benefit speculators.
“Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small,” Roblox CEO David Baszucki wrote in a recent memo, according to The Wall Street Journal.
A February funding round valued Roblox at $4 billion, raising $150 million as venture-capital powerhouse Andreessen Horowitz joining existed investors like Altos Ventures and Tiger Global Management.
“What gets us really excited and where we see the most upside is in the long-term vision,” David George, general partner at Andreessen Horowitz, told the Journal. “We think there is a real chance for Roblox to become the ‘metaverse’” — a virtual universe among online users.
Roblox allows users to play millions of user-created video games for free, or make new games using online tools that the company provides. The company makes its money by taking a share of funds players spend to buy extras like virtual clothes or pets for their avatars.
The platform even has its own in-game currency called “Robux,” which users can exchange for real-world currency. Some designers reportedly make six-figure incomes on the platform selling virtual clothes or other items for avatars.
Roblox also hosts a growing number of virtual events, from an annual Easter egg hunt to the Bloxy Awards, an Oscars-like awards ceremony for the best games and other items made for the site. Roblox also recently held its first virtual concert with rapper Lil Nas X, and recently held an event for the premiere of the movie Wonder Woman 1984.
Oscar Health ($3.2 Billion)
InsurTech Oscar Health announced this month that it has confidentially filed for an IPO. The company didn’t put a date on when the offering will occur, but said in a statement that it expects the IPO to commence “after the completion of the SEC review process, subject to market and other conditions.”
Co-founded in 2012 by Josh Kushner, brother of President Donald Trump’s son-in-law and adviser Jared Kushner, Oscar specializes in selling health insurance directly to consumers and small businesses. It’s the first health-insurance-focused InsurTech to move toward an IPO as newcomers try to disrupt the massive medical coverage industry by using technology.
“The underlying healthcare system is broken and data systems are a bit disparate,” Brett Lotito, Oscar’s vice president of insurance operations, told PYMNTS earlier this year. All customers get free 24/7 telemedicine visits through a network of doctors and hospitals, and can directly schedule live or virtual appointments via the company’s app.
Oscar has yet to make its S-1 filing public and has released few specifics of the IPO, saying only that “the size and price range for the proposed offering have not yet been determined.”
However, Bloomberg last estimated Oscar’s valuation at $3.2 billion in 2018 based on $165 million funding round that included Google parent Alphabet. The company also raised $140 million earlier this month in a round led by Tiger Global Management.
Billtrust ($1.3 Billion)
B2B order-to-cash solutions provider Billtrust agreed in October to go public via a merger with South Mountain Merger Corp., a special purpose acquisition company (or “SPAC”).
Under terms of the deal, Billtrust investors will receive shares in a publicly traded company called BTRS Holdings, which will trade on the Nasdaq and be worth about $1.3 billion to start. Founder and CEO Flint Lane and other top management will continue to run the company after the merger, which the firms said in an SEC filing they expect will occur around Jan. 12.
Lane told Karen Webster in an interview shortly after the merger announcement that it’s an opportune time for Billtrust to go public because the pandemic is forever changing B2B payments.
"It's fun to see the world waking up to this opportunity," he said. "The companies that are helping the world figure that out should receive outsized returns because of that. … The industry thinks, ‘If we can just get this payment on ACH or card, the problem goes away.’ And that's just not true."
Lane said Billtrust decided to go public via a SPAC because doing so offered “significant advantages in terms of timing, certainty and the amount of money you can raise." But he added that while going public is an important milestone for Billtrust, it’s "just a step along the path to our goal."
Poshmark ($1.25 Billion)
Social media-focused clothing reseller Poshmark filed for an IPO earlier this month, with shares likely to start trading sometime in 2021.
Poshmark is a popular site for consumers to sell secondhand clothes, relying on a heavy social media aspect in which buyers and sellers interact and share “likes” about items instead of just conducting commerce.
“We are a social marketplace that combines the human connection of a physical shopping experience with the scale, reach, ease and selection benefits of eCommerce,” the company wrote in its S-1 filing.
Poshmark reportedly had a $1.25 billion valuation as of 2019. But unlike some platform companies that have filed to go public, the firm is actually profitable.
The company turned its first profit in the quarter that ended June 30. After losing $14.5 million in 2018 and $48.7 million in 2019, Poshmark made $21.1 million in the June 30 quarter and $10.7 million in the Sept. 30 quarter.
Poshmark also reported that its revenues grew 28 percent year on year during 2020’s first nine months to hit $192.8 million. The company saw even better sales growth in its Sept. 30 quarter, with revenues rising 37.7 percent year over year to $68.8 million from $50 million in the same 2019 period.
However, that might not be good enough to impress IPO investors. For instance, Target reported a 155 percent jump in third-quarter digital sales, while Walmart’s online sales grew 79 percent during the same period.
