The novel coronavirus affected the initial public offering market. Many companies that had filed prior to the pandemic delayed their upcoming IPOs. But this summer the market was seeing a heavy amount of IPO activity. And quite a bit of it was coming from companies going public through a special purpose acquisition companies (SPAC).
Is this the time to go public? There is some feeling that some companies are trying to slide their IPO in before the market dries up. But the prevailing sentiment is that these companies have been winners in the pandemic and they want to go public. For many of these companies they understand that investors have limited growth options and will continue to put their capital to work in the market.
And for investors who may be leery about seeing a repeat of the dot-com melt up of 1999-2000, that concern may be overblown. Ed Zimmerman, chair of the tech group at the Lowenstein Sandler law firm in New York City says, “The companies that we’re seeing going public in the high-tech world today are performing.”
With that as a backdrop, let’s look at six anticipated upcoming IPOs that appear to be ready to hit the market in the fourth quarter of 2020.
- Cole Haan
Upcoming IPOs: DoorDash
One of the most anticipated upcoming IPOs in 2020 is DoorDash. The food delivery app is reportedly planning to begin trading sometime in the fourth quarter after initially filing back in February. One of the reasons for the excitement is the breadth of market covered by DoorDash.
The analytics firm Second Measure reported that DoorDash controlled 45% of the food delivery app market in June. That was almost twice the market share of UberEats (NYSE:UBER) that came in at 24%. One reason for this is that DoorDash is a logistics and delivery company only. The company is agnostic in terms of steering customers to particular restaurants. This in turn allows restaurants that don’t have a delivery service to use their service.
It’s fair to say that the trend towards online delivery will continue at least through the end of the year. However, this is a rapidly changing market. By market share alone DoorDash looks like they will be one of the companies that will make it through the ongoing consolidation. But there are no sure things in the IPO market.
And DoorDash is not profitable. And in 2019 despite raising nearly $1 billion in revenue, it still lost $450 million. The company is valued at $16 billion.
Another delivery app hoping to make noise among the upcoming IPOs is Instacart. The grocery delivery app may not make it public in 2020, but it’s drawing plenty of attention from analysts.
The company is forming partnerships with many leading retailers who are trying to pivot to a delivery model that has been brought on by the pandemic.
One of the company’s latest partnerships is with 7-Eleven. This is Instacart’s first national convenience store partner. However, the company has over 400 national, regional, and local retailers that deliver from over 30,000 stores across North America. That makes its potential addressable audience over 85% of the United States.
Instacart is thriving during the pandemic. According to the company’s chief technology officer, app downloads in March increased by over 200%. And unlike many IPOs going public, Instacart is already profitable, having generated $10 million in profits just in April.
In June, Instacart raised $225 million after reporting that “unprecedented surge in customer demand” was causing them to double its workforce to approximately 500,000.
To understand the appeal of Cole Haan, you need to look no further than Lululemon (NASDAQ:LULU). The company, which is known for its high-end dress footwear is making a push into the athleisure market.
According to the company’s IPO filing, 50% of U.S. organizations now allow employees to “dress down” every day. This is creating a need for footwear that customers can wear to work directly to a workout or weekend.
And it’s a market that is working for the company. In 2019, casual, outdoor and sports styles made up over half of the company’s shoe sales. To better capture sales in this market, the company is looking to sell its products in sporting goods stores.
It’s unclear whether the 90-year old manufacturer of high-end shoes will go public in 2020, but they have begun the IPO process. After initially filing earlier this year, the company has indicated it may delay its IPO due to market volatility caused by the novel coronavirus.
The company is forecasting raising $100 million through the IPO.
McAfee is attempting to go public for the second time. The company is backed by private-equity firms TPG and Thoma Bravo.
McAfee was publicly traded in the late 1980s until being acquired by Intel (NASDAQ:INTC) in 2010. That merger never quite worked and now after being spun off from Intel in 2017, the company is attempting to go public once more.
This makes the company different than other upcoming IPOs. Investors don’t typically see a new IPO from a company that’s been around for over three decades. The question is if that’s good or bad for McAfee.
McAfee can point to a business that’s running at an annual revenue scale of greater than $2.5 billion. Also, unlike virtually every other IPO, McAfee is profitable on both an adjusted EBITDA and free cash flow basis.
The cybersecurity company’s revenue is nearly equally divided between its consumer and enterprise customers. In fact, the company generates slightly more revenue from the consumer side which is another way the company is different than many cybersecurity companies.
It wouldn’t seem right to talk about upcoming IPOs without bringing up an electric vehicle (EV) startup. So, let’s talk about Fisker, which is going public through a special purpose acquisition company (SPAC).
As of mid-September, SPACs have raised $31 billion in 2020. That’s already a record figure and more companies, like Fisker are being added every day.
Fisker founder and Danish designer Henrik Fisker is hoping the third time is the charm. Fisker originally owned Fisker Automotive, a private company that went bankrupt in 2013. Fisker’s bold plan for his new company centers on the Fisker Ocean. The Ocean is a “premium yet affordable” SUV that is expected to debut at a base price of $37,500. This will be putting it in direct competition with the Model Y from Tesla (NASDAQ:TSLA) that starts at $49,990.
Fisker claims the Ocean will be the world’s most sustainable vehicle. And Fisker is negotiating with Volkswagen (OTCMKTS:VWAGY) to use the German automaker’s EV platform.
A recent Wall Street Journal editorial outlined the “K-shaped” recovery that is the reality for many Americans. There are some industries, and some Americans, that are tied to sectors that are thriving in this pandemic. But other sectors “can expect to bear years-long scars from the crisis.”
I might put AirBnb somewhere in the middle. The company was not immune to the crash in tourism that, to a large extent, is still ongoing. However, the company has seen an unexpected rebound off the 90% decline in bookings it was experiencing earlier this year. And that was enough for the company to file for an IPO in mid-August.
Still, the company’s most recent private funding round gave the company a valuation of $18 billion. That was nearly half of its $31 billion in 2017. Said one analyst, “… Airbnb’s biggest challenge is in managing an end product that is largely out of their control.”
And although it seems more likely that AirBnb will not go public until 2021, there are few things that would surprise me this year. So, let’s add the company to the list.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.