Recently, I noticed an article from CNBC that discussed four Silicon Valley venture capital (VC) firms that made a billion dollars from their portfolio companies’ initial public offerings (IPOs). While it’s a nice story to read if you work in the VC industry, it doesn’t do a whole lot for the average retail investor. However, it did give me the idea for today’s gallery of possible stocks to buy. The keyword is billion.
Basically, I thought why not recommend seven jumbo IPOs to buy for the remainder of 2021 and into 2022. To make the list, a company had to go public between January and June as well as had to have raised a billion dollars or more from its share sale. According to StockAnalysis.com, there have been 577 IPOs in the first six months of the year. In addition, only a handful of them raised over $1 billion.
To keep things interesting, I’ve picked one IPO for each of the first six months of 2021, with a second pick from any of the six. And, to make it really interesting, I’ve also tried to diversify my picks by sector. That’s tough, given so many tech stocks have gone public in 2021, but here goes.
- Marqeta (NASDAQ:MQ)
- Oatly (NASDAQ:OTLY)
- Agilon Health (NYSE:AGL)
- Coupang (NYSE:CPNG)
- Soaring Eagle Acquisition (NASDAQ:SRNG)
- Playtika (NASDAQ:PLTK)
- Shoals Technologies (NASDAQ:SHLS)
Jumbo IPOs to Buy: Marqeta (MQ)
Date of IPO: Jun. 8, 2021
First-day return: 13%
Marqeta is one of the most recent billion-dollar IPOs. While it wasn’t on the same level as Didi Global (NYSE:DIDI), which raised $4.4 billion on Jun. 30, it managed to secure $1.23 billion in funding. It plans to use these funds for general corporate purposes, including investing in its business and making suitable acquisitions.
To give you an example of what the Marqeta platform does, I’ll point to Shakepay, a Canadian fintech platform for buying and selling digital currencies. The platform has processed more than 2 billion CAD ($1.6 billion) in purchases and sales since its founding in 2015.
Basically, Shakepay wanted to develop a prepaid Visa (NYSE:V) for its customers. Marqeta’s open API platform allowed it to bring a new card product to the marketplace quickly and efficiently. According to Marqeta’s IPO prospectus (Page 2):
“Marqeta’s open APIs provide instant access to our highly scalable, cloud-based, and configurable payment infrastructure that enables our Customers to launch and manage their own card programs, issue cards to their customers or end users, and authorize and settle payments transactions.”
To put it another way, Marqeta’s open APIs are like a restaurateur being given an empty canvas to create whatever space they desire.
One of the bigger risks here, though, is that Square (NYSE:SQ) is responsible for 73% of its $108 million in Q1 2021 revenue. If that company were to go somewhere else, Marqeta would be up a creek without a paddle. But I don’t think that’s going to happen. In fact, it’s more likely that Square CEO Jack Dorsey takes control of the business at some point. However, there are two other risks.
MQ stock has got a frothy valuation. It’s also currently losing money, although the loss level appears to be slowing, not speeding up. All in all, it’s definitely an interesting business worth checking out.
Date of IPO: May 19, 2021
Sector: Consumer Defensive
First-day return: 18.8%
Next up on this list of IPOs, Oatly raised $1.43 billion, selling 84.4 million shares at $17, which was at the high end of the pre-IPO marketing range.
Altogether, it’s not surprising that this company was able to raise so much money. It is, after all, the largest oat milk company in the world. With the move to healthier and environmentally friendlier food and beverage options, OTLY stock wasn’t likely to disappoint.
Based in Sweden, it has taken a long time to get to the point where the company could go public. Founded by food scientists in 1994, it’s gone from a scientific experiment to a player in the food business serving more than 60,000 retail stores and over 32,000 coffee shops in “more than 20 markets, across multiple channels and types of retail, foodservice and e-commerce partners.” Some of Oatly’s customers include Starbucks (NASDAQ:SBUX), Target (NYSE:TGT) and Alibaba (NYSE:BABA).
Back in 2020, this company’s sales increased by almost 107% to $421.4 million while its operating loss also increased. Ultimately, what makes Oatly so attractive is the profits that it will generate once it builds out an end-to-end manufacturing footprint beyond Sweden. This is kind of like Tesla (NASDAQ:TSLA) adding more “gigafactories” — it will happen. After all, the brand name’s too strong.
Finally, though, I really love this business because one of its directors (Fredrick Berg) is a regular employee following Swedish law. According to Section 4 of the Private Sector Employees Act of 1987, if a company has 25 or more employees, the workers are entitled to two seats on the board. And, if they have 1,000 or more, that jumps to three representatives on the board.
Oatly appears to only have one, but I’m sure there’s a relatively straightforward explanation as to why that is. In any case, this representation is just one more reason OTLY stock is an interesting name.
Jumbo IPOs to Buy: Agilon Health (AGL)
Date of IPO: Apr. 14, 2021
First-day return: 34.8%
Agilon Health reported its first quarter as a public company back in late May. It only got its start as a healthcare company in 2016. Since then, Agilon has run a “Total Care Model” in which primary care physicians get paid a monthly fee to manage the total healthcare needs of their patient pools. Focused on seniors and Medicare patients, Agilon has grown to “16 anchor physician groups in 17 geographies,” including Columbus, Pittsburgh, Buffalo, Austin and elsewhere.
The Agilon platform is now serving more than 210,000 Medicare Advantage patients. Plus, an additional 50,000 Medicare fee-for-service patients will be served in the future through its participation in the Center for Medicare & Medicaid Innovation.
Needless to say, this name is growing like weeds. In 2020, AGL grew revenue and members by 53% and 45%, respectively. In Q1 2021, revenue also jumped 42% to $413 million. So, while it lost about $14 million in the quarter, up from $8 million a year earlier, its business is headed in the right direction.
Agilon expects to finish 2021 with at least 182,000 members, up from 165,300 at the end of March, while revenues will be at least $1.77 billion on the year. On an adjusted EBITDA basis, it expects to lose at least $38 million in 2021.
Finally, with $1.1 billion in cash and just $50 million in debt on its balance sheet, Agilon is more than prepared to continue scaling its business. By focusing on primary-care physicians and their ability to provide total care to the seniors market, I could see this pick of the IPOs becoming really big, really fast. Be sure to consider AGL stock.
Date of IPO: Mar. 10, 2021
First-day return: 40.7%
In mid-June, I had the opportunity to write a single-stock commentary about this company. I concluded that, even though it disappointed after its first day as a public company (today it’s down about 20% year-to-date (YTD)), the possibility of CPNG’s future success in Singapore and Japan is real.
Backed in a big way by Softbank (OTCMKTS:SFTBY), who owns 33% of the company, I argued the lack of appreciation of CPNG stock since its IPO suggests it’s unlikely that SoftBank will be selling many shares come September and the expiration of its lock-up period.
As for the negatives, a fire ripped through the company’s six-story warehouse in Incheon and left a firefighter dead, which has led many in South Korea to boycott the company. How well it handles through this incident will greatly determine this pick of the IPOs’ future trajectory.
Interestingly, the company also obtained a $266 million loan from Goldman Sachs (NYSE:GS) in 2017 with the warehouse as collateral. The interest rate on the loan was 5.5%. However, Goldman Sachs is said to be considering demanding early repayment. If that happens, CPNG will more than likely obtain a similar amount from other lenders at a lower rate on the strength of its e-commerce business.
It’s something to keep an eye on, but otherwise, you’re buying growth at a reasonable price with CPNG stock in my opinion.
Jumbo IPOs to Buy: Soaring Eagle Acquisition (SRNG)
Date of IPO: Feb. 23, 2021
Back in February, a couple of veterans of the special purpose acquisition company (SPAC) movement — Jeff Sagansky and Harry Sloan — raised $1.5 billion in one of the largest SPAC deals ever. Soaring Eagle was the duo’s seventh SPAC together. They were able to find and announce a target within three months of SRNG stock’s IPO.
On May 11, Soaring Eagle announced that it would be merging with Ginkgo Bioworks, a biotech that uses software and automation tools to scale the process of organism engineering. Ginkgo calls itself “The Organism Company” because it helps other businesses build better products.
For example, it’s working with Corteva (NYSE:CTVA) — the agriculture company spun off from DowDuPont in 2019 — to develop insecticides, pesticides and fungicides that are more sustainable while also being effective. Ginkgo will also use its cell engineering platform to develop enzymes and natural compounds that Corteva can use to “create more resilient crops.”
I’m not going to lie — the kind of science we’re talking about generally flies right over my head. But the $17.5 billion deal has many heavy hitters involved, including Cathie Wood’s Ark Investment Management and Bill Gates’ investment vehicle, Cascade Investment. Sagansky and Sloan already have two interesting de-SPACs in Draftkings (NASDAQ:DKNG) and Skillz (NYSE:SKLZ). So, I suspect the third time will be just as enticing with this pick of the IPOs.
Date of IPO: Jan. 14, 2021
Sector: Communication Services
First-day return: 17.1%
Playtika is an Israeli developer of mobile games. It raised $1.88 billion when it went public in January. True, PLTK stock had an average opening as one of the IPOs, but ever since it’s been downhill. Today, PLTK stock is down about 30% YTD.
At the end of March, InvestorPlace contributor Mark Hake called this name a value play based on the fact it was trading very near its 52-week low. In addition, Hake believed at the time that its positive free cash flow (FCF) and overall profitability made it attractive.
While the company’s profitability stepped back in 2020 — it had a net income of $92.1 million in 2020, down from $288.9 million — its FCF has kept chugging along. For the trailing 12 months through Q1 2021, it had FCF of $410 million. Based on revenue of $2.37 billion and a recent market capitalization of $9.25 billion, it currently has an FCF margin of 17.3% and an FCF yield of 4.4%. Both of those metrics are more than acceptable.
Moreover, PLTK’s revenues increased almost 20% over last year to $638.9 million in Q1. In terms of profitability, its adjusted EBITDA increased by nearly 39% to $258 million. Additionally, it expects to generate adjusted EBITDA of $1 billion in 2021 from $2.6 billion in revenue. That’s up from its previous guidance of $920 million and $2.44 billion.
Finally, CEO Robert Antokol interestingly remains involved with the company despite it being sold not once but twice. The company was first sold in 2o11 and the second time in 2016 to a consortium of investors, including Giant Network Group.
It’s very rare for a founder to stay on after selling their baby. But to stay around after a second sale says something about Antokol’s commitment to making Playtika work. I don’t play games myself, but I like that commitment.
Jumbo IPOs to Buy: Shoals Technologies (SHLS)
Date of IPO: Jan. 26, 2021
First-day return: 23.9%
Last up on this list is Shoals Technologies, my “extra” pick of the IPOs which raised more than $1 billion in the first six months of 2021. So, what is SHLS stock?
Truth be told, I didn’t know a lot about this company before reading its prospectus. Shoals went public on Jan. 26 of this year, selling 88.55 million shares to investors at $25 a share — above the pre-IPO marketing range. Of those shares, the company sold 11.55 million, raising gross proceeds of $289 million. Likewise, the existing shareholders sold 77 million shares worth $1.9 billion, although Shoals gets none of these proceeds.
However, the net proceeds it does get will be used to buy back shares of its parent LLC from pre-IPO investors, pay back outstanding debt and for general corporate purposes. But what does this company do?
Well, in simple terms, Shoals’ products act as a go-between in the solar industry, sending electrical current generated by solar panels to an inverter and ultimately sending that power to your grid. That’s solar at its finest.
More specifically, Shoals manufactures electrical balance of systems (EBOS) solutions for solar, storage and electric vehicle (EV) charging infrastructure. Products include cable assemblies, inline fuses, wireless monitoring systems, junction boxes, transition enclosures and much more.
That said, you don’t really have to know what all of these things are. What’s important is that you know they’re critical to the safe and efficient operation of your solar panel system. The company believes that 54% of the solar generation capacity in the U.S. has used at least one of its products. In the end, Shoals’ EBOS systems will continue to grow its sales as solar power becomes the norm across the U.S. and the rest of the world.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.