Who’s Going Public in the Summer IPO Rush?
The recently frozen IPO market is heating up, and companies are racing to go public before the end of summer
The pandemic almost completely shut down the IPO market this spring, crushing the stock market and marking April and May as the slowest public offering run since 2009. It also dashed the ambitious plans of IPO hopefuls, including DoorDash, Robinhood, and Airbnb.
But as the stock market has surged back, so too has the voracious appetite for public offerings. Many companies are now rushing to go public before the end of summer. On Thursday, two not yet profitable VC-backed companies had big public market debuts: Lemonade, a tech startup specializing in renters and homeowners insurance, and Accolade, an employee benefits software company. Lemonade, which raised $319 million at $29 per share, finished the day up almost 140%, with a market cap of more than $3 billion. Meanwhile, Accolade, which raised $220 million at $22 per share, had an opening day pop of 35%, valuing the company at more than $1 billion.
That’s coming on the heels of business analytics firm Dun & Bradstreet’s $1.7 billion IPO earlier in the week and recent IPOs from grocery chain Albertsons, sales software data provider ZoomInfo, online car dealership Vroom, and record label Warner Music Group. Last month, as many as 39 companies went public, raising $15 billion in capital. Nearly every IPO upsized (increased the number of shares offered) or priced above the middle of its expected range. And IPOs averaged a 38% first-day pop, according to Renaissance Capital, paving the way for more IPOs to come. Here are a few of the companies that could make an IPO run this summer.
The software startup quietly filed for an IPO last month, an offering that could balloon its valuation to $20 billion. Started in 2012, Snowflake’s cloud data warehousing and analytics services have experienced a surge in demand in the past year. In fact, CEO Frank Slootman says the company generated more than $100 million in revenue in 2019, a 174% increase compared to 2018. The company, which is going head-to-head with the likes of more established veterans like Google, Amazon, IBM, Oracle, and Microsoft, has raised more than $1.4 billion in VC funding, with a current valuation of around $12.8 billion. One investor, Salesforce, will be particularly strategic, because Snowflake’s data can be combined with Salesforce data, showing up automatically for Salesforce customers. Wall Street investors are closely watching the Silicon Valley company, and its prospective IPO has been called “one of the most anticipated tech listings of the year.”
Seattle designer Cooper DuBois started this mobile gaming company in 2009 with its signature DoubleDown Casino game for Facebook. Three years later, DuBois sold it for $500 million. Today, the Korea-based owner of DoubleDown has four social casino games that have been installed more than 100 million times and log more than 3 million players each month. That’s led to a healthy bottom line: DoubleDown earned $36.3 million in profits on $273.6 million in revenue in 2019. The company, which filed to go public in June, was expected to go public this week on the Nasdaq exchange, when it suddenly postponed the IPO after already scaling back the size of the offering and reducing the expected listing price. Some had expected a public debut this summer could bring the company’s valuation to $1 billion, but it’s unclear whether the company will try again this summer.
Airbnb announced plans for an IPO in September 2019, making it one of the most anticipated IPOs of 2020. But the coronavirus put a wrench in those plans when it upended the travel industry and Airbnb customers canceled more than $1 billion in bookings. The company laid off 1,900 people, delayed its IPO filing, and raised $1 billion to help keep the company afloat. In recent months, things have taken a surprising twist: Airbnb is now on track to do more business in 2020 than it did the year before, CEO Brian Chesky told Fortune. Before the pandemic hit, Airbnb had reportedly been considering going public via a direct listing, in which the company sells existing shares rather than issuing new ones (and circumvents the Wall Street investment banks, which typically reap most of the benefit from the opening day IPO pop). Direct listings had been gaining popularity — Slack and Spotify went that route. Such listings can also speed up the IPO process: Spotify, for instance, held just one “investor day” to educate prospective investors versus a months-long investor roadshow. With an upswing underway, an IPO is still on the table, though Chesky didn’t necessarily commit to it. “We are absolutely not ruling it out,” he said.
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Investors eagerly anticipated the IPO of another tech unicorn, Asana, which filed to go public back in February. The company, which makes an app that lets teams organize, track, and manage their work, hit $100 million in revenue in 2019; in 2018, private investors put a valuation of $1.5 billion on the business. Co-founders Dustin Moskovitz and Justin Rosenstein (both Facebook mafia) intend to go public through a direct listing. The company has been quiet since the coronavirus hit about whether it will still go public, but it would be poised to do well, given the product is positioned to benefit from the tailwinds of ubiquitous remote work.
The food delivery company filed for its IPO in February but put off the offering when the pandemic struck. Last month, private investors infused another $400 million into the startup at a whopping $16 billion valuation, bringing the company’s total funding to $2.5 billion. Despite rapid growth and increased demand for restaurant food delivery during lockdowns this spring, DoorDash is still bleeding money: In 2019, it lost $450 million on revenue of $900 million. The delivery company faces stiff competition from Grubhub, Uber Eats, and Postmates (which is considering its own IPO if the acquisition from Uber falls through). DoorDash also faces a class action lawsuit (along with its competitors) for allegedly exploiting dominance in meal delivery services with hefty fees. Even after the company raised a hefty chunk of change, there’s still speculation that DoorDash may go public, just because it is burning through so much cash.
Robinhood launched in 2013 with the goal of building a platform that democratized the financial markets with no-fee stock trading. Millennials jumped on the app, topping 10 million users last year. The company has suffered glitches of late: When the financial markets were in chaos this spring, the trading platform went down, leaving angry customers to watch their stock values drop without being able to do anything about it. Despite this, user growth has continued to climb as stock trades have perhaps filled the gambling void left by the absence of sports betting and casinos. Investors have been waiting for an IPO for two years, after CEO Baiju Bhatt publicly said in 2018 that the company was gearing up for one. Instead, Robinhood raised $373 million from private investors in 2019 and $280 million more in May of this year, securing a $8.3 billion valuation. So the IPO plans are still up in the air.
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The unicorn grocery-getter app has been booming lately. Demand for the service surged this spring, as millions of people who sheltered in place ordered grocery deliveries. In March, the volume of orders grew 500% over the 12 months prior, with shoppers spending 35% more per order. And in April alone, the company turned a profit of $10 million, thanks to deals with Walmart, Kroger, and Costco and a service area that reaches 85% of the United States and 70% of Canada. When the rest of the economy stopped, Instacart announced it would bring on 300,000 new shoppers over three months. The historic growth was a boon compared to 2019, when the company ran into problems with its freelance shoppers. In January, it paid $4.6 million to settle a class action lawsuit filed by workers who said that they lost tips because of the company’s policies. Instacart has been quiet on whether it will IPO this summer. The private markets continue to provide needed capital: Venture investors put $225 million into the startup in early June, an investment round that drove Instacart’s valuation to $13.7 billion, up from $7.9 billion.