IPO Stampede

Frothy stock markets, a flood of liquidity, and sky-high valuations have made going public an attractive option for more companies than ever before this year. As of last week, 954 companies had listed their shares on U.S. markets in 2021, raising a combined $301 billion, according to data from Dealogic. Both of those figures more than double last year's totals.

And companies are raising more money than ever before. In 1996, when the previous record of 848 initial public offerings was set, the fund-raising total was just $79 billion. Even when excluding the 60% of the 2021 IPOs that were special-purpose acquisition companies, or SPACs, the remaining 383 traditional IPOs still collected an annual-record $148 billion. 27 firms raised more than $1 billion a piece this year.

But it hasn't been all rosy for those newly public companies once they've gotten out: close to 60% of this year's IPOs were trading below their offer prices as of last week. That includes some high-profile names like DiDi Global, down 54%, Sweetgreen, down 40%, and Robinhood Markets, and Allbirds, which have both dropped 47%.

On the opposite end of the spectrum are Affirm Holdings and Rivian Automotive, up 134% and 47%, respectively, from their offering prices.

What does that dynamic mean for 2022's likely IPOs? Barron's Luisa Beltran has the preview:

All this means that while the IPO market is likely to be just as busy next year, big institutional investors are becoming more cautious about high-growth start-ups and may be more discerning about where they put their money. This could result in better deals on newly public companies for retail investors in 2022.

Among the companies expected to go public next year are Chobani, the yogurt maker (possibly as soon as January, say people familiar with the offering); Chime, a digital bank; Instacart, the grocery-delivery upstart; Houzz, a home-remodeling platform; Reddit, the social-media platform that’s home to WallStreetBets and other forums; Databricks, an AI software start-up; and chat service Discord.

The biggest one on the horizon is Stripe, the payments processor, which is widely expected to go public next year. Valued at $95 billion in its last fund-raising round, Stripe would be the biggest U.S. company to go public since Facebook in 2012.

More rationally priced IPOs could be an opportunity for retail investors who don't get access to private investment rounds or IPO allocations.

Read the rest of Luisa's report on 2021's IPO market and what to expect for 2022 here.