Tech companies worth more than $100bn collectively are due to go public in December in an intense moment of market fever that matches the dotcom bubble of two decades ago for enthusiasm.
Short-term rental site Airbnb, food delivery app DoorDash, online gaming company Roblox, internet shopping service Wish and fintech company Affirm are among the companies set to be worth more than $10bn (£7.5bn) when they float in the coming weeks. The companies are united by having emerged stronger from the economic chaos caused by the pandemic.
On Monday, DoorDash revealed that it planned to sell shares at up to $85 each, a price that would value the company at $32bn, double what it was worth in June. Airbnb, which took emergency financing at a valuation of just $18bn in April, hopes to be worth more than $30bn. The company is due to begin its investor roadshow on Tuesday ahead of an initial public offering (IPO) in around two weeks.
Stock market listings in the US have already raised more than $140bn this year, eclipsing the 1999 record set at the height of the dotcom boom, according to data from Dealogic.
Tech companies alone have raised around $28bn and December’s wave of flotations is likely to see 2020 pass the $34.7bn raised by tech companies in 2000. This would mean more money raised by 2020’s class of tech IPOs than in any year beyond 2014, when Chinese giant Alibaba accounted for more than half the $40.5bn raised.
10 companies that have not yet floated filed to go public in November, and another six are yet to float, having filed earlier in the year.
Tech IPOs raising
Markets have soared to all-time highs as a spate of positive announcements about a Covid-19 vaccine and the prospect of ongoing monetary stimulus from central banks push investors into equities. Technology companies in particular have boomed as the pandemic promises to reshape consumers’ behaviour around online shopping, delivery and gaming, and the biggest companies going public in December are those that have been buoyed by the effects of the virus.
Airbnb has rebounded far faster than hotel rivals, DoorDash has enjoyed a takeaway boom, and Roblox’s user numbers have soared as gamers are stuck at home. Wish and Affirm have both benefited from a shift to online shopping during the pandemic.
Jay Ritter, a finance professor at the University of Florida, said that while none of December’s expected listings matched gigantic flotations such as Facebook’s 2012 IPO that valued it at $104bn, or Alibaba’s $170bn listing in 2014, the pace of companies valued in the tens of billions of dollars was unprecedented. “I can’t think of any months where multiple companies that are going to have market caps of $20bn, $30bn, $40bn went public,” Mr Ritter said. “It’s always been the case that more companies go public following market increases when the market is at a high level.”
In addition to DoorDash and Airbnb, Wish, which allows shoppers to buy cheap goods, mostly shipped directly from China, is expected to seek a valuation of up to $30bn. Both Roblox, an online universe popular among children, and Affirm, which lets shoppers pay for goods in monthly installments, are hoping for valuations above $10bn. All five companies are loss making, although Airbnb and DoorDash have registered individual quarters where they made a profit.
Mr Ritter said that the proportion of unprofitable companies going public was similar to the dotcom bubble, but that 2020’s cohort largely consisted of older and more established companies. “Today the companies going public have largely made it clear they’re going to be one of the survivors. They’ve waited longer, they’re more mature both in age and in terms of revenue.”
An earlier flurry in September this year, in which software maker Snowflake, video game company Unity and data mining specialist Palantir went public, saw $9.96bn raised by 14 tech companies, the most in at least five years.
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