Typically, financial advisors recommend robust exposure to blue-chip stocks, if indeed your profile calls for equity-based investments. As established businesses with proven track records, this category features a certain level of reliability and predictability in exchange for outright performance. However, if you want to dial up your reward potential, initial public offerings may be worth investigating. Some of the best IPOs could be just over the horizon in 2022.
First and foremost, everything in the markets is about ratios. For instance, if you play it safe, you’ll likely rarely lose, if ever. But in exchange for that safety, you sacrifice upside return potential. On the other hand, if you short stocks, you could make it big on one trade. However, if the trade goes awry, you might be on the hook for unlimited liability. It’s the same situation with even the best IPOs.
I know — it’s awkward to start off a best-of list with a downer. Nevertheless, you’ve got to know what you’re getting into before you dive in. And even with strong due diligence, the market or the economy could shift far away from your hypothesis. Last year, for example, Bumble (NASDAQ:BMBL) attracted attention as one of the best IPOs.
Unfortunately, BMBL is down over 51% for the year up as of writing. While Bumble took a leadership role in the burgeoning ESG (environmental, social, governance) movement regarding gender equity, the market apparently dismissed this narrative. It may be rude, it may be upsetting, it’s comparatively anachronistic. But it is what it is. And that’s why you must prepare yourself. Even the best IPOs have blind spots.
Having explained the risks regarding new public issues, there’s also the very real possibility that these shares could shine. A shining star is Dutch Bros (NYSE:BROS), the drive-thru coffee chain that’s off to a blistering start. With so many potential opportunities in the wing, here are (potentially) the best IPOs of 2022.
- Panera Bread
As you know, 2021 will be a record year for new offerings, with the segment generating over $301 billion as of this writing. To be blunt, I would be surprised to see 2022 break this record given how the Federal Reserve shook up the market recently. Because of this and other circumstances, these anticipated best IPOs might not make debut in the new year. But if they do, be sure to conduct your due diligence.
Best IPOs for 2022: Reddit
While I can’t be for 100% certain, if I had to guess what would be the biggest public market debut of 2022, I’d go with social media giant Reddit. Recently, the company revealed that it had confidentially filed its intent to go public with the Securities and Exchange Commission. However, since its Form S-1 is still not available for public review as of this writing, we just don’t know much about it.
For those of you who desire financial exegesis on your prospective investment ideas, you should check out my Reddit coverage for Benzinga. But for a quick summary, the Reddit IPO should benefit from intense community support. As you know, the platform helped facilitate the meme-stock phenomenon that earlier forced Wall Street hedge funds to their knees. And believe me — no one was shedding tears for those vultures.
Now, it seems Reddit wants a bigger piece of the capital market action, suddenly making it one of the best IPOs — or at least the best in terms of desirability. Although intriguing because of its remarkable influence, going public may change the culture of what attracted people to Reddit in the first place.
Also, you’ll want to watch the revenue mix. While meme-ing was a growth engine for Reddit, it’s not clear how sustainable this ride is.
One of the burgeoning industries which I initially had mixed feelings about was the plant-based meat sector. In 2019, Beyond Meat (NASDAQ:BYND) was one of the best IPOs, quickly soaring and profiting early believers. Since then, BYND has been largely rangebound and this year it’s been awful, with the equity unit shedding nearly 45% on a year-to-date basis.
In that respect, it might be ideal for Impossible to wait out its turn to be labeled among the best IPOs. Although industry analysts project sales to increase multiple fold by 2030, Fooddive.com reports that sales have slowed down for Beyond Meat and its competitors. Part of the problem is the pricing. While much more ethical, meat substitutes feature higher ingredients and production costs.
However, that’s where rival Impossible presents an intriguing idea for best IPOs of 2022. Per another Food Dive article, the company is “still well capitalized, growing and has more global expansion in its sights.” Particularly, management states that it’s “now the fastest-growing plant-based meat company in retail.”
Moving forward, the health impact of plant-based meat could be a deciding factor for consumers. Some studies show that eating large amounts of processed meat could raise risk levels of dementia.
Best IPOs for 2022: Airtable
A workplace collaboration app-building platform, Airtable has always been among the most relevant technology startups thanks to its ability to effectively build around an enterprise’s needs and scale accordingly. Additionally, the inherent efficiency accelerator makes the platform particularly valuable in the new normal. As some experts have pointed out, remote work is not great for productivity.
These aren’t just words. In November 2018, Airtable raised $100 million in a private-equity funding round, turning it into a unicorn with a valuation of $1.1 billion. Since then, the startup is worth 10 times that amount. Recently, Airtable received dramatic buoyancy in its valuation, thanks to a $735 million raise through multiple investment firms.
Now commanding a pre-money valuation of $11 billion, Airtable is among the world’s most valuable startups. And that means it could be one of the best IPOs — if it decides to go public.
Unfortunately for prospective retail investors, Airtable hasn’t necessarily demonstrated much pressure to enter the public arena. Per a corporate spokesperson, “no official timetable has been set.” Still, you’re going to want to keep an eye on this space since the underlying business is so pertinent to our present (and probably future) circumstances.
When the coronavirus pandemic first capsized the global economy, the food and beverages industry took some of the sharpest hits. Obviously, with almost no one out and about, even major metropolitan areas resembled ghost towns. Quickly, many restaurants turned to food deliveries, with mixed success. As you might imagine, larger enterprises with a strong market presence fared better than most.
But now that much of the fear surrounding Covid-19 has declined, it may be time for eateries to exercise their growth ambitions. That’s the case with Panera Bread, which in November announced that it was going public via a merger with USHG Acquisition Corp (NYSE:HUGS), a special purpose acquisition company (SPAC).
Unlike a traditional IPO, SPACs have no underlying operations. Instead, they launch an IPO to raise funds for a merger with a viable private enterprise. Following shareholder approval, the SPAC and the target firm combine, with the SPAC assuming the identity of the target.
In other words, it’s a roundabout way to enter the public arena. Still, Panera has the potential to become one of the best IPOs thanks to its multi-billion-dollar revenue channel. However, prospective investors should watch the omicron variant threat as earlier reports about it being less dangerous might not be totally accurate.
Best IPOs for 2022: Chime
As the explosive growth of cryptocurrencies demonstrated, younger people are disillusioned with traditional financial infrastructures. Instead, they prefer a platform that works around their schedule. And because millennials also embrace non-orthodox professional pursuits such as gig work, an online financial app like Chime is much more relevant for this demographic.
Part of the burgeoning financial technology (fintech) industry, experts project that this underlying global segment could reach a valuation of $324 billion by 2026. Therefore, Chime, if it indeed decides to enter the fray, will enjoy a large total addressable market.
Unlike some of the most-anticipated best IPOs, however, Chime appears eager to embrace the next evolution in its journey. According to a Forbes article in October of this year, management is in talks to go public at a valuation between $35 billion and $45 billion.
Assuming these talks don’t fall apart, Chime presents serious upside potential thanks to wide appeal from institutional investors. This was one of my earlier IPO reports for Benzinga, where I noted its strong private funding rounds. According to the latest data from Crunchbase.com, Chime has raised a total of $2.3 billion over 10 rounds.
Among the biggest changes over the last few years is the manner in which people consume their media-driven content. While we all know about streaming services disrupting the box office, this dynamic is also pronounced with news consumption. For instance, the Pew Research Center notes that more than 80% of Americans get their information from digital devices.
Naturally, this circumstance has opened the door for alternative or independent media channels to thrive and that’s where Discord comes into the picture. Rather than being yet another social media company, Discord is a digital platform powered by VoIP and other communication technologies to help facilitate online community development.
As an example, progressive thought leader The David Pakman Show uses Discord to take calls from the audience. Additionally, the host will leverage the platform’s flexible applications to connect with his fanbase on various live events.
Enticingly, after talks fell through with Microsoft (NASDAQ:MSFT) regarding an acquisition, the rumor mill suggested that Discord could become one of 2022’s best IPOs. According to Crunchbase, Discord has raised nearly $983 million over 14 funding rounds. If it does enter the public arena, it might be one of the smaller offerings that carry a big punch.
Best IPOs for 2022: Lime
Despite massive improvements in transportation technologies over the last several years, the last-mile problem ironically represents a nagging cost-accruing issue. In other words, it’s relatively easy and cheap to fly or ship bulk cargo from one location to another. But getting the final leg of the journey from distribution center to the destination point is the most expensive.
Additionally, this concept translates into the personal mobility realm. For instance, taking a bus to cover large swathes of distance is efficient. However, getting to the ultimate destination point could be costly, either in terms of time (walking) or money (ride sharing). However, the development of emissions-friendly personal transportation devices means that experts project the global micro-mobility market to reach $69.3 billion by 2028.
That would provide a large addressable market for Lime, which provides bikes, electric scooters and mopeds for quick and convenient transportation throughout several major urban centers. Users can download the Lime app, enabling them to find the closest device to them to finish their journey efficiently.
According to a November report from Techcrunch.com, Lime “closed a $523 million raise in convertible debt and term loan financing.” This paves the way for Lime to possibly be one of the best IPOs next year.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.