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In the first half of 2020, the initial public offering market was severely impacted by the coronavirus pandemic, affecting both potential listings and companies that had recently gone public. But by summer, IPO activity had surged again, and the fall saw record-breaking IPOs in the tech space.
If this is your first foray into the world of initial public offerings, check out our IPO explainer below to learn what IPOs are, how to invest in them, and the risks and rewards of doing so.
Most financial advisors suggest investing for long-term growth. So, if you “miss out” on an IPO listed below, don’t fret. If it’s a solid business and you’ve got a long-term growth mindset, you don’t have to be first in line to buy.
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Upcoming IPOs to watch
Here’s a list of the most highly anticipated IPOs of 2021.
Better.com, the home lending service that advertises no lender fees or commissions, is said to be considering an IPO in 2021 after starting talks with Morgan Stanley and Bank of America. Reports in November 2020 noted the company could file its Securities and Exchange Commission paperwork as soon as January.
Better.com’s latest round of fundraising brought in $200 million, and the company was valued at $4 billion. Launched in 2016, Better Mortgage was founded with a mission similar to so many recently founded companies: To upend an industry that’s gone mostly unchanged for decades. Better.com claims to bring transparency, speed and lower costs to the home-buying process.
Dating app Bumble has reportedly swiped right on Citigroup, Morgan Stanley and Goldman Sachs to help lead it to an IPO in 2021. Bumble has set itself apart from other dating apps by requiring women to make the first connection with a possible match, but it’s grown beyond just this service. Now, users can find friendship and career connections in addition to romantic connections.
Reports from November 2020 indicated the company could seek a valuation as high as $8 billion in an IPO, which could come as early as the first quarter of the year.
Coinbase has emerged as a user-friendly way to trade cryptocurrencies, distilling what was once a collection of highly complicated tasks into a streamlined, in-app service. Users can buy cryptocurrencies in fiat money or trade their holdings in one cryptocurrency (like Bitcoin) for another (like Litecoin).
Talk of a Coinbase IPO first emerged in July 2020 when Reuters published a report with sources who said the company had started making plans to go public in late 2020 or early 2021. However, Coinbase has still given no public indication confirming the reports and has yet to file any IPO-related paperwork with the SEC.
Shoemaker Cole Haan has over 90 years of experience in consumer goods, weathering the greater part of the 20th century’s ups and downs.
Over the last few years, the company has invested $100 million into digital innovation to remain relevant in the quickly evolving retail space. However, the timing of Cole Haan's IPO is up in the air. The company delayed its IPO during the market turmoil of early 2020 and has yet to announce when it might go public. When it comes time to list, though, it’s hoping to raise $100 million.
Real estate brokerage Compass has made a name for itself by pairing traditional brokerage services with innovative technology, billing itself as the “first modern real estate platform.” But Compass offers more than just lofty marketing speak. In 2019, it acquired artificial intelligence and machine learning company Detectica to further enhance its AI-driven home recommendation services.
Talk of a Compass IPO started back in 2019 when CEO Robert Reffkin said an upcoming IPO was “likely,” though the company didn’t take any further official action. However, Compass currently has a job posting for an associate general counsel for securities, and Glassdoor employee reviews reveal a “pre-IPO” excitement at the company.
DataBricks may not be a household name, but the software the company has created is used by Microsoft (also an investor), HP, Comcast and Regeneron Pharmaceuticals, just to name a few. DataBricks claims to “make big data simple” by streamlining the tools used to analyze that data.
News broke of the company’s potential IPO in October 2020, when reports showed the company was in the early stages of discussing going public, and that an IPO could come in the first half of 2021.
In October 2019, DataBricks raised $400 million in funding and was valued at $6.2 billion.
South Korea’s DoubleDown Interactive, which develops and publishes digital social casino games and has an office in Seattle, originally filed its paperwork with the SEC to offer American depositary shares in the U.S. market in June. The company boasts it was the first social casino publisher and has been among the top 20 grossing mobile game publishers in the Apple Store since 2015. However, on July 1, the company announced it had postponed its IPO, and did not indicate when it might move forward.
GitLab (not to be confused with Microsoft-owned competitor GitHub) has been open about the possibility of going public for years, and once even had a specific date in mind. However, the company has since removed that date from its website, stating that the strength of its business model gives it “latitude in selecting a favorable public offering environment and not be beholden to a specific date.”
For now, it’s a waiting game. But for those keeping an eye on GitLab, reports from late November 2020 showed a secondary share sale valued the company at $6 billion, up from $2.7 billion in 2019.
The pandemic has undoubtedly reshaped consumer behavior. When Americans aren’t ordering delivery from their favorite takeout restaurant via DoorDash, they are getting their staple groceries delivered from their favorite grocery stores via Instacart.
In a June 11, 2020, blog post, Instacart said it had experienced an “unprecedented surge in customer demand” for its services, leading the company to double its workforce of shoppers to about 500,000. Following this demand, Instacart raised $225 million, bringing its current valuation to $13.7 billion.
Instacart CEO Apoorva Mehta said in an interview with CNBC in May 2019 that he expects the company will eventually prepare for an IPO, but it has yet to file any official paperwork with the SEC regarding a move to go public.
Neighborhood-based social media app Nextdoor has always been on a mission to promote neighborliness, but its strategy has been particularly effective during the pandemic: In the first quarter of 2020, during the onset of coronavirus-induced lockdowns, daily active users increased by more than 50% in each of the rural, suburban and urban areas it tracks.
Now, reports indicate the company is considering going public — possibly in 2021 — with a potential valuation between $4 billion and $5 billion, though this hasn’t been confirmed by the company.
Petco officially filed its form S-1 with the SEC on Dec. 3, 2020, but did not provide any further information on share price or a possible IPO date. It did, however, share its ticker: the highly apropos WOOF.
The filing showed revenue of $3.58 billion in the 39 weeks ended Oct. 31, 2020, and also indicated the number of households with pets in the U.S. is expected to have increased by 4% by the end of 2020.
Stock-trading commissions were largely eliminated by major online brokers last year, which may have diluted the appeal of free-trading app Robinhood. But the app continues to add users in large numbers, and CEO Baiju Bhatt has said the company, with a valuation north of $7.5 billion, does indeed intend to go public.
However, Robinhood has not yet presented a timeline or public filing, and given its slew of recent app outages during major market moves, it’s unclear when the company may do so. (Read NerdWallet’s Robinhood review.)
UiPath specializes in robotic process automation and sports the tagline “we make robots so people don’t have to be robots.” The goal? Let users configure computer software to automate processes that have historically been done by humans, from finance and banking operations to processes in the telecom, manufacturing and insurance industries.
Reports from September 2020 suggest the company could be valued at more than $15 billion, and that the company is looking to hire IPO underwriters for a potential 2021 IPO.
What is an IPO and how do I invest in one?
An IPO is Wall Street’s version of a launch party. It marks the first time a privately held company becomes a publicly traded one.
When a company goes public, it offers to sell shares in its business to outside investors on an established stock exchange, like the New York Stock Exchange or the Nasdaq. Investors can then purchase those shares, which makes them a part-owner of the business.
Once the pricing details and IPO date are finalized, mark your calendar: This will be the date when shares of the newly public company are available for retail investors to buy, which you can do via a brokerage account.
» See the full list: The best brokers for beginning investors
The mechanics of purchasing shares in a company that's gone public are pretty straightforward. Here’s a brief guide to how to buy stocks, including information on how to navigate your broker’s website and place an order.
But this is where IPOs can be deceptive. There’s a difference between an IPO offering price and the price you’ll pay for the stock. The offering price announced ahead of the IPO is a fixed price reserved for a limited group of investors, including the company’s employees and investors who satisfy certain eligibility requirements (such as a minimum asset balance or how frequently they trade).
Their orders are filled before the opening bell rings on IPO day. To entice investors, the IPO price is typically lower than what analysts pricing the company believe the shares can fetch on the open market.
For most investors, an IPO signals an opportunity to start buying the company's stock the day it starts trading on the market, rather than the chance to get in on the stock at the set IPO price. That means the price you pay will reflect the demand for the stock on the day it debuts and could differ dramatically from the offering price. And opening-day hype only adds to the price volatility.
IPOs can spike higher and plummet quickly in the early days of being publicly traded. Consider Snap, the parent company of Snapchat that went public in March 2017 with an IPO price of $17. It jumped more than 40% on its first day of trading, but since then has largely traded at or below its IPO price.
What are the risks of investing in an IPO?
You may celebrate getting in early on the latest IPO if it proves to be a long-term success, but you’ll be cursing that same stock if it blows up your portfolio. No investment is a sure thing, and IPOs are no exception.
While IPOs may appear to offer a tantalizing get-rich-quick opportunity, there have been some famous flops over the years. Take Pets.com, which liquidated less than a year after its IPO, or Groupon, which has yet to see its stock anywhere near the level at which it debuted.
According to an analysis from investment bank UBS, of the more than 7,000 companies that had IPOs between 1975 and 2011, about 60% had negative total returns after five years of being publicly traded.
To mitigate some of the risks, take the same approach to investing in IPOs as you would to buying any other stock:
Know what you’re getting into
When researching a company, start by reading its annual report — if it has been publicly traded for a while — or Form S-1. Many of the risks to a company’s short- and long-term success are outlined by company insiders in those reports. But don’t just take their word for it: Do your own research into the industry, the company’s competitors and general stock market conditions before you invest in any company. That’s a smart thing to do whether the company is established or new to the public markets. (Here’s how to research a stock.)
Ease your way into ownership
Buying a lot of shares of a volatile stock at the beginning can set you up for a wild ride. When a company’s share price is somewhat unpredictable, dollar-cost averaging (spreading out your trades and purchasing the stock at regular intervals over time) protects you from the risk of, say, buying shares at the peak. And keep in mind that you don’t have to be the first in line: Stocks like Apple, Amazon and Google have historically provided rich gains for investors who bought shares years after those companies’ initial public offerings. Of course, this can go the other way, too. The risk of loss in any investment always exists, and a newly-public company performing well in its early days in no way guarantees it will maintain that performance in the future.
Keep your portfolio in balance
Never let a single investment — IPO or otherwise — skew your portfolio’s allocation in a way that could be detrimental to your long-term goals. To reduce your overall risk, a general rule of thumb is that the portion of your holdings devoted to individual stocks should make up no more than 5% to 10% of your overall portfolio, with the remainder of your long-term savings spread out across a variety of index mutual funds.
If an IPO is what gets you excited about investing in the stock market for long-term growth, that’s great. Just remember that individual stocks on their own aren’t the only way to get in on the action — there are other diversified investments like the aforementioned index funds that allow you to buy a large selection of stocks at once. To explore these and other options, see our step-by-step guide for beginners on how to invest in stocks.
Recent IPOs: Where are they now?
Some recent IPOs have seen strong performances since their debut. Others, not so much — and that’s the very nature of IPOs. Explore the calculator below to see how well you would have fared had you invested in the IPOs of these companies (or check out NerdWallet's investment calculator for a more general look at investment growth).
As many had expected, Airbnb’s IPO made headlines on its first day of trading on Dec. 10, 2020. Shares were priced in the IPO at $68, but in its debut on the public market, Airbnb started trading at $146 — a 115% leap. The stock briefly hit a high of $165 before closing slightly down at $144.71.
Albertsons was listed on the New York Stock Exchange on June 26, 2020, at an offering price of $16 per share, but finished its first day of trading down at $15.45 per share.
This lackluster debut came after the company lowered its initial offering price of $18-$20 per share.
Asana went public through a direct listing and began trading on Sept. 30, 2020, with shares priced at $27 — nearly 30% higher than the reference price of $21 set by the New York Stock Exchange. The stock rose even higher on its first day of trading, closing at $28.80 per share.
Beyond Meat Inc. (BYND)
Talk about a first-day IPO pop: The share price of the plant-based meat company nearly tripled in its initial day of trading in May 2019, making it one of the best-performing IPOs for a company its size since 2000. Since then, the stock price has simmered and sizzled, dropping to the mid-$60s, then doubling again weeks later. Along with the broader markets, BYND suffered through March and April, but its share price soared in May.
Investors who aren’t still smarting from the spectacular Pets.com crash during the dot-bomb era in the early 2000s might be interested in Chewy. This e-tailer, focused solely on pet products, IPOed on the New York Stock Exchange on June 14, 2019, at an offering price of $22 and closed the day at $34.99, a share price increase of 59%. In 2020, share prices remained flat through February and March, but have been mostly on the rise since.
The company is an independent subsidiary of PetSmart Inc., which remains a majority stockholder after the IPO. If shareholder rights are high on your priority list, consider that the company has a dual-class share structure, which means Class A shares get one vote and Class B shares (those owned by insiders and existing stockholders) carry 10 votes each. That dual-class structure also means Chewy is ineligible to be included in the major indexes, like the S&P 500, or any mutual funds or exchange-traded funds that passively track them.
CrowdStrike Holdings (CRWD)
CrowdStrike has made a name for itself in the cybersecurity space. It’s the company that investigated the hack of Democratic National Committee servers in 2016, as well as other high-profile breaches. True to its name, the company uses crowdsourcing systems (along with artificial intelligence and other means) to identify threats and zero in on perpetrators.
The company started trading on June 12, 2019, at $34, and shares nearly doubled at one point during the first trading day, eventually closing up 71% from the offering price.
When DoorDash priced its shares at $102, it meant the company expected to raise about $3.4 billion to achieve a valuation of about $39 billion. But when shares hit the New York Stock Exchange on Dec. 9, 2020, the stock opened at $182, rose throughout the day, and closed at $189.51. By the end of its first day on Wall Street, the market valued DoorDash at around $60.2 billion.
Fiverr International Ltd. (FVRR)
Rideshare services weren’t the only gig-economy companies that debuted in 2019. Fiverr’s online marketplace connects companies looking to hire out jobs (or “buyers,” in Fiverr lingo) with freelancers (“sellers”). The Tel Aviv, Israel-based company says it has facilitated more than 50 million transactions since its inception. Fiverr’s June 2019 IPO price was set at $21 per share; it eventually closed up 90%, at $39.90.
While some investors may be tempted to compare Fiverr to Upwork (UPWK), which has similar offerings and went public in October 2018, Fiverr has outperformed its rival post-IPO. While Upwork’s stock has been sliding since a peak in February 2019, Fiverr stock bounced back quickly from the market turmoil in the first quarter.
Rideshare company Lyft beat rival Uber to an IPO when it pulled onto the public market in March 2019 at a price of $72 a share. Since then the ride has been mostly downhill, with Lyft shares trading below the IPO price.
Palantir’s stock debuted on the NYSE the same day as Asana on Sept. 30, 2020, at $10 per share. This was 38% higher than its IPO price of $7.25, but Palantir’s rise was just beginning. By late November, the stock had surged to $29 per share.
Palantir’s services are wide-reaching and profound. The CIA used its technologies to help locate Osama bin Laden in 2011, it’s helping the U.S. Space Force track extraterrestrial objects and the Centers for Disease Control and Prevention is using it to monitor the spread of the coronavirus. The company has been awarded many more multimillion-dollar government contracts.
Peet’s Coffee and Tea (JDEP)
Despite the rocky markets, Peet’s Coffee and Tea parent company JDE Peet’s went public on May 29, 2020, to raise 2.3 billion euros ($2.5 billion), making it the largest European IPO so far in 2020. Shares were priced at 31.50 euros and traded slightly higher in the days following.
Fitness company Peloton went public on Sept. 26, 2019, at an IPO price of $29. The startup aims to make working out at home a “viable, exciting option,” with screen-equipped stationary bikes and treadmills that play a variety of live and on-demand group fitness classes.
Peloton’s bikes start at $2,245; treadmills are nearly double that. Subscriptions to access classes are purchased separately. Peloton has raised nearly $1 billion in funding and is valued at around $4 billion. Peloton’s stock price dipped during the coronavirus sell-off, but shortly after reached new all-time highs.
Pinterest, the image search and sharing app, went public in April 2019 and quickly learned what it’s like to do business under Wall Street scrutiny. Investors sent the share price tumbling in May when the company posted its first earnings report, illustrating just how volatile an IPO can be in its early days. PINS bounced back to hit a fresh high in August 2019 but has since struggled to recover lost territory.
Rocket Companies Inc. (RKT)
Rocket Companies, which includes Quicken Loans and Amrock, Inc., priced its shares at $18 and began trading on the NYSE on Aug. 6, 2020. By close on its first day of trading, the stock rose 19.5% to $21.51.
Workplace collaboration service Slack also performed a direct-market listing (as Asana has proposed) on June 20, 2019. Slack’s reference price was $26, and the company opened at $38.50.
Spotify was among the first high-profile DPOs back in 2018; Airbnb and GitLab are now reportedly considering the strategy, too.
When cloud-based data storage and analytics firm Snowflake began trading on Sept. 16, 2020, its shares more than doubled, making it the largest software IPO in history. Shares were priced at $120 the night before trading began, but opened at $245, hitting a high of $319 before ending the day at $253.93 per share.
The RealReal (REAL)
In May 2019, consignment platform The RealReal filed with the SEC to go public. The company sells pre-owned luxury goods — a curated selection of apparel, accessories, jewelry, watches, art and other home goods — on consignment online and in a handful of retail stores. Goods are inspected and authenticated by RealReal experts before they’re put up for sale. The company processed 1.6 million orders in 2018, with an average order value of $446. As of March 31, 2019, The RealReal has paid nearly $988 million in commissions to consignors.
The RealReal had an exceptional debut in June 2019, rising 40% in a single day from its initial price of $20 to $28. So far in 2020, though, its stock has struggled to shine and hasn’t managed to climb above its initial $20 price point.
With a valuation of $82 billion, rideshare app Uber was one of the biggest tech IPOs ever and one of the most hotly anticipated offerings of 2019. But following the sputtering market debut of archrival Lyft in March, Uber went public in May 2019 at a lower-than-anticipated price of $45 and has mostly traded below that price since.
Online used-car marketplace Vroom submitted its initial plans to go public on May 18, 2020, in hopes of raising $100 million. The filing came just six months after the company raised $254 million in December 2019, raising its valuation to unicorn status at $1.5 billion.
Vroom priced its shares at $22, and on its first day of trading the stock more than doubled, closing at $47.90.
Warner Music Group (WMG)
As the third-largest record label in the world, Warner’s S-1 filing in early February 2020 commanded attention. With the rise of streaming services, record labels have walked a rocky road in the 21st century, but Warner’s 4% year-over-year revenue increase for the first fiscal quarter of 2020 suggests it may have found steadier footing.
Warner Music Group opened up to public trading on June 3, 2020, at $27 per share, above the IPO price of $25. The stock climbed to $30.12 by the day’s close, an 11.6% increase.
Zoom, the cloud-based videoconferencing company, didn’t attract as much attention as other tech IPOs in the famed Class of 2019 when it went public in April of that year, despite being one of the few profitable companies on the roster. But now investors are taking Zoom’s calls: The stock popped 80% on its first day of trading and has been benefiting from 2020's shift to remote work. Zoom’s videoconferencing technology makes it easier for companies to maintain operations with remote employees, a coveted capability during the height of the coronavirus outbreak.
Not to be confused with video-conferencing software company Zoom (ZM), ZoomInfo pressed forward with its IPO on June 4, 2020, despite the market uncertainty. The company, which offers market intelligence to sales and marketing teams, initially priced its shares between $16 and $18, but ultimately raised this price several times in the days leading up to its first day of trading, settling at $21. The stock opened at $40, nearly double the offering price.
» Ready to invest? See our list of the best brokers for stock trading
The author Chris Davis owns shares of Airbnb.
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