Last year saw the rise of the special purpose acquisition company (SPAC). Many companies opted out of the initial public offering (IPO) path and instead went for a SPAC reverse merger since it entailed less paperwork and bureaucratic hurdles.
According to data compiled by Statista, the SPAC volume was approximately twice as much last year than the previous ten years combined. However, the traditional IPO has several benefits for investors. However, it has seen better days.
When investing in an IPO, you know that you are allocating capital to a company that went through a more stringent vetting process than a SPAC. You also have more financial information with an IPO, such as future projections and past financial data. So, do not take upcoming IPOs lightly.
Plus, there is an excellent lineup of companies going public soon. We have narrowed it down to seven potential multi-baggers. Remember, though; most IPOs underperform the market after going public. Considering this, it is not wise to dedicate a large portion of your portfolio to IPOs. Rather, pick your spots wisely and diversify your investment.
With that being said, the time is right to take a deep dive on seven of the most talked about, headline-grabbing companies going public soon:
- Rivian Automotive
- iFit Health & Fitness
- Warby Parker
Now, let’s take a closer look at each one.
IPO to Watch: Stripe
No discussion on upcoming IPOs can be complete these days without Stripe. The Irish-American payment processor had a great time last year, as e-commerce boomed due to the novel coronavirus pandemic. Last year, it generated $7.4 billion in revenue, a year-over-year (YOY) uptick of 70%, the Wall Street Journal reported, citing people privy to the information. Excluding third-party fees, revenues clocked in at $1.6 billion, which is still a very healthy number.
The success of Stripe is all down to its business model. It encompasses everything you want in a payment processor. The company started as just a payment processor. However, it has now expanded into a point-of-sale device called Terminal and offers lending and risk management services. When you have all of these solutions under one roof, it reduces the churn rate.
Private equity has also taken notice. Stripe managed to raise $600 million in its latest funding round, lifting its valuation to an eye-watering $95 billion. Leading the fundraising round were Allianz X, Fidelity Management & Research Company, Sequoia Capital, and Axa, among others.
Last year, rumors circulated that Bill Ackman might be looking to take this one public through one of his SPAC vehicles. However, talks fell through because of the high valuation. Nevertheless, whenever the IPO takes place, expect shares to skyrocket.
Social media companies are not as hot as they used to be at one point. Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) are mature enterprises with relatively stable user bases. But the social media space still has a number of interesting companies. For example, Nextdoor, like its name suggests, is focused on greater interaction in the neighborhood.
If you want to know about the latest events in your community or want to organize something, this app will help you connect with the right people around you. Nextdoor neighborhoods can range between 100 and 3000 households, although it believes the app operates best between 750 to 1000 households. According to its data, the San Francisco-based company serves over 275,000 neighborhoods globally, and nearly 1 in 3 U.S. households use the application.
Guiding the company through the IPO and beyond is Sarah Friar, who was appointed CEO in late 2018. She has previously served as CFO of Square (NYSE:SQ) and has also worked at Salesforce.com (NYSE:CRM) and Goldman Sachs (NYSE:GS). Having a good management team is key to the success of any enterprise, and that’s why investors should be very bullish about NextDoor.
IPO to Watch: Rivian Automotive
Irvine, California-based Rivian Automotive manufactures electric pickups and is backed by Ford Motor (NYSE:F) and Amazon (NASDAQ:AMZN). Last month, it filed an S-1 registration to the Securities and Exchange Commission to go public at a valuation of roughly $80 billion. According to Bloomberg, the company is targeting the Nov. 25 Thanksgiving holiday as the date to go public.
Some investors might think Rivian has missed the boat. The electric vehicle (EV) gold rush took place at the start of the year, and it is now slowing down. Most EV stocks in the space have corrected as people invest more of their capital in recovery plays.
All of this is true, but it misses a key component of this debate: the long-term technological and environmental shifts favor EV stocks. Governments worldwide are serious about tackling climate change, and it will involve substantially decreasing the global carbon footprint, which means you cannot count out the EV sector.
Rivian, in particular, has the backing of Amazon, which is one of the biggest companies in the world. Of course, it’s no secret that Jeff Bezos and Elon Musk have a rivalry. In turn, it could spill over to the EV space, as analysts already consider the possibilities of a Rivian vs. Tesla (NASDAQ:TSLA) electric vehicle arms race. Rivian has already inked an agreement with Amazon to produce 100,000 electric delivery vans through till the end of 2030. And by the end of 2022, the company is expected to deliver 10,000. The production schedule is hurt by the parts shortages due to Covid-19. However, with things getting back to normal, things should be getting better on that end.
Instacart is a grocery delivery and pickup service. The app allows customers to select their groceries from many retailers and then deliver them to personal shoppers. Founded in June 2012, InstaCart was progressing at a consistent pace but went into hyperdrive last year due to the nature of the coronavirus crisis. As people sheltered in their hopes, e-commerce sales skyrocketed, and InstaCart was yet another beneficiary. In 2019, every month saw the online grocer lose $25 million. However, in April 2020, it managed to record a first-time profit of $10 million.
Due to the positive buzz, Instacart managed to attract $265 million in March in its latest funding round, giving it a valuation of $39 billion. Just five months before this, it netted $200 million, leading to a valuation of $17.7 billion. It marks the second time InstaCart’s valuation doubled since the start of the pandemic. The only thing that could slightly go against the firm is that the economy has reopened, and there could be a knock-on effect on online sales. However, the shift to digital is secular. There could be momentary blips along the way, but the general trajectory is up.
Although we do not know when InstaCart will go public, Goldman Sachs has been tapped to lead the effort. There are rumors that it could take the direct listing route rather than go for an IPO. Whatever it chooses, you can be sure the online grocer will do very well.
IPO to Watch: Discord
Discord is a messaging platform that has had a unique journey. It originated when Jason Citron and Stanislav Vishnevskiy created a bespoke instant messaging and digital distribution platform to connect with remote developer teams when they were developing games. They had previously evaluated several options. However, none of them fit what they were looking for, so they did what most software developers do when faced with such a problem, they built a new system from scratch, which eventually became Discord.
Although estimates vary, Discord now has over 150 million monthly active users, and it generated revenue of $130 million in 2020. Usage increased massively last year as people stayed at home and played games, making sure to increase the number of users active on the platform massively. Considering all of these factors, Microsoft (NASDAQ:MSFT) discussed a potential buyout of Discord for more than $10 billion. However, the deal fell through. Nevertheless, considering the cash at its disposal, it’s not like Discord will be worrying.
Just recently, it netted another $500 million in its latest fundraising round led by investment firm Dragoneer Investment Group, leading to a $15 billion valuation, over double last December’s valuation of $7 billion.
iFit Health & Fitness
Most of the companies gearing up for an IPO this year do not have a long history. However, one cannot say the same for iFit Health & Fitness. A fitness equipment giant, the company traces its history to the 1970s. The brainchild of Scott Watterson and Gary Stevenson, it started as an Asian kitchen and tableware importer. It then moved into other areas such as fitness equipment and then never looked back. The NordicTrack, Freemotion, ProForm and iFit are now major brands in the U.S., helping the company generate more than $1.7 billion in revenue for the year ended May 31, 2021.
Users can operate products offered by the company through the cloud and multiple applications. Through the use of biometric data, iFit can help improve your exercise regimens. You can also take advantage of the company’s live and on-demand content options; iFit already has 1.5 million paying subscribers of this service.
It has filed an S-1 form with the U.S. Securities and Exchange Commission (SEC) for its IPO and is looking to raise $100 million through the offering. According to the documents, shares are expected to debut on the Nasdaq under the ticker “IFIT.”
IPO to Watch: Warby Parker
Warby Parker is expected to list on the New York Stock Exchange on Wednesday, Sept. 29, 2021, under the ticker symbol “WRBY.” That means we are within striking distance of this affordable designer eyeglasses company making its much-awaited debut.
New York City-based Warby Parker has had a very interesting journey getting to this place.
It all started when Dave Gilboa went on a vacation to Southeast Asia and misplaced his eyeglasses. When he browsed online for a replacement, he found out that he had to pay an arm and a leg for a new pair. That’s when he decided that he could disrupt the eye care industry and make a nice profit. He teamed up with his Wharton classmates and never looked back.
It has reported sales of $270.5 million for the first half of the year, a 53% jump over the year-ago period. Net loss decreased to $7.3 million compared to $10 million last year. Adjusted EBITDA finished at $20.1 million, a substantial YOY improvement from $1.2 million. Warby Parker targets a slightly older dynamic, which is why it has 145 retail locations to sell its product.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.