IPOs have their best year – even better than the dot com boom

By Paul R. La Monica, CNN Business

Private companies are debuting on Wall Street with a record music video this year.

There have already been more initial public offerings in the first three quarters of 2021 than there have been in all of 1996 – the best year ever for IPOs, according to FactSet .

In the first nine months of this year, 785 companies went public in the United States, compared to 664 for all of 1996 – the dawn of the internet stock madness – and 555 last year.

The dating app Bumble, plant-based dairy company Oatly, and online brokerage giant Robinhood are among the hottest “unicorn” companies to go public this year.

Hot shoe seller Allbirds also debuted on Wednesday, and the stock has climbed more than 70%.

Startups are benefiting from low interest rates and other stimulus from the Federal Reserve, an insatiable investor appetite for fast-growing startups, and the rise of special purpose acquisition companies or SPACs.

PSPCs have become popular means for companies looking to go public with a little less regulatory control.

Richard Branson’s Virgin Galactic, DraftKings, and scaled-down WeWork all went public by merging with a PSPC. Former President Donald Trump is also considering merging his new social media company with a PSPC.

Some large companies also choose to go public through direct stock quotes on the Wall Street stock exchanges. Roblox and Coinbase both issued shares directly instead of selling new shares in an IPO.

Of course, not all IPOs skyrocket once they start trading. And even those who like a solid start tend to decline.

The Renaissance IPO ETF, which owns shares of large, high-profile companies that have gone public in recent years such as Roblox, Coinbase, Airbnb and DoorDash, rose only 7% in 2021, lagging behind broad market gains.

But the surge in demand for regular IPOs shows that many so-called unicorns (startups with a valuation of at least $ 1 billion) are ready to continue the old and good way of going public. .

This shouldn’t change anytime soon.

“An accommodating market environment and high valuations have encouraged issuers to go public,” said Rachel Gerring, head of the IPO of EY Americas, in a report released last month. “We are cautiously optimistic that these trends may continue until the end of the year and into 2022.”

Electric vehicle maker Rivian and Brazilian digital banking giant Nu Holdings are also expected to go public later this month.

“We expect the IPO market to end the year strong, with a strong pipeline and a large backlog to support fourth quarter issuance,” said analysts at Renaissance Capital, a research and investment that focuses on IPOs, in a recent report.

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