Initial public offerings (IPOs) on U.S. stock exchanges are on track for a record year in 2021. Through the end of July, proceeds from U.S. IPOs totaled $89 billion, a 232% increase from the same period last year, according to Renaissance Capital. This has, of course, led to a spread of new stocks on the market.
If current trends hold, funds raised through IPOs this year will surpass the record $97 billion raised in 2000 during the “dotcom boom.” Companies are keen to go public and raise money now with stock markets at all-time highs.
Many companies put off planned IPOs last year amid uncertainty caused by the Covid-19 pandemic. A total of 250 IPOs have already priced in 2021, up 191% from the first seven months of last year and already surpassing 2020’s 218 total number of IPOs.
In recent weeks, a number of high profile companies have gone public through both traditional IPOs and reverse mergers with special purpose acquisition companies (SPAC deals). While not all the stock market debuts have been successful, many of the new stocks are worth investigating for potential buying opportunities.
In this article, we look at three new stocks in an effort to determine if they should be on investors’ buy lists.
Hot New Stocks On the Market: Robinhood Markets (HOOD)
Here we go again. After one of the worst initial public offerings in recent memory held on July 29, online brokerage Robinhood Markets stock jumped more than 60% on Aug. 3 and 4, blowing past its IPO price of $38 a share, climbing north of $60 a share. In what might be the ultimate irony, HOOD stock appears to have been targeted by the same retail traders who meet on Reddit’s r/WallStreetBets and use the Robinhood platform to pump up so called “meme stocks” to unreasonable and unsustainable levels.
The $38 initial price of HOOD stock was at the low end of its offering range, and the shares tanked 8% on their first day, leading many pundits to label the IPO a dud. This was an embarrassing turn for Robinhood, which claims to want to level the playing field between professional and retail traders.
The online brokerage’s popularity soared during pandemic lockdowns. Robinhood, which offers stocks, bonds, cryptocurrencies and options trading on its platform, had 18 million clients at the end of this year’s first quarter, up 151% from 7.2 million in 2020.
While it stumbled out of the gate, HOOD stock has attracted some notable attention on Wall Street. Atlantic Equities issued the first rating on Robinhood stock, initiating coverage with an “overweight” rating and $65 per share price target. Similarly, Ark Invest’s Cathie Wood gave the stock a vote of confidence by purchasing 3.15 million shares in the first two days the stock was available.
While it definitely carries some risk, Robinhood stock might be worth a gamble for investors looking for short-term gains.
Lucid Motors (LCID)
Is electric vehicle (EV) manufacturer Lucid Motors the next Tesla (NASDAQ:TSLA)? The company’s stock has certainly been behaving like Tesla’s since it went public on July 26 via a reverse merger with a special purpose acquisition company (SPAC).
After debuting at close to $27 a share, LCID stock has fallen 14% to its current level of $23.08. Once high flying shares of Tesla now trade at $718.72 each, up 2% on the year and 20% below their 52-week high of $900.40 per share.
To be sure, Lucid Motors has an impressive entry in the electric vehicle market. The company’s Lucid Air sedan is a luxury electric vehicle that retails for as much as $160,000 for the top end model and can travel 500 miles on a single battery charge. Production of the Lucid Air sedan is scheduled to begin at the company’s Arizona factory in this year’s second half. A second electric vehicle, an SUV called the “Gravity,” is planned to enter production late this fall. Lucid Motors has announced plans to begin selling its Air sedan in Europe early next year (2022).
Lucid Motors distinguishes itself from most other EV start-ups mainly because it can boast actual production numbers, while its competitors mainly have models in the conceptual phase.
The company may have to report some quarterly results before LCID stock stabilizes and rises, but investors should view Lucid Motors as a reliable long-term bet in the electric vehicle space.
Hot New Stocks On the Market: Krispy Kreme (DNUT)
Of course, Krispy Kreme is not a new stock. But it returned to public markets with an initial public offering (IPO) on July 1 after being held by a private company since 2016.
The Winston-Salem, North Carolina-based chain, originally founded in 1937 and is famous for its hot, out-of-the-oven doughnuts, that first went public in 2000. However, Krispy Kreme was taken private again by JAB Holding Company, a private Luxembourg-based firm, after filing for bankruptcy following financial restatements, investigations into its accounting practices and a drop in sales across its franchise network.
Today, Krispy Kreme sells its doughnuts in 12,000 grocery and convenience stores across the U.S. and operates nearly 1,400 stores in 33 countries worldwide.
To promote its July IPO, Krispy Kreme gave away free glazed doughnuts to customers who showed a valid Covid-19 vaccination card at one of its stores. The promotion, while well-intentioned, didn’t do a lot to help DNUT stock. Since debuting on the Nasdaq exchange at $21 a share, the company’s stock has fallen 27.5% and now trades at $15.27.
The current view on DNUT stock is to take a wait-and-see approach. While Krispy Kreme is a legacy brand that is well-known and has fans, it remains unclear if the company can make a go of it as a publicly traded company. Krispy Kreme also had $1.2 billion of debt at the time of its IPO and has said it plans to use the proceeds from its share sale to pay down that debt.
Like other newly traded stocks on this list, Krispy Kreme will likely have to reassure Wall Street that it is a viable going concern through consistent quarterly results.
On the date of publication, Joel Baglole 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.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.