List of Upcoming IPOs in 2020–2021 / Part 8
While investing in an IPO might seem like an easy way to make short-term gains, it is hardly ever that simple. There have been plenty of instances where IPOs of fundamentally strong, well-known companies have failed to make a mark. So, investing in an initial public offering warrants a different strategy when compared with buying stocks in the secondary market. There are a host of factors that you should consider and things you should keep in mind. Let’s take a quick look at some of these aspects.
The prospectus (S1-Form)
When you hear about an upcoming IPO, the first thing that you should do is read through and analyse the company’s prospectus. The prospectus is your primary source of information about a company that’s coming out with an IPO. It is basically an information booklet that contains every vital piece of information about the company. In addition to that, it also specifies the objectives of the company, includes its financial information over the years, the key managerial personnel involved, important legal disclosures, and what it plans to do with the proceeds of the IPO.
By thoroughly analysing the prospectus, you can not only acquaint yourself with the company’s business but also get a fair idea of its financial performance and future growth prospects. This exercise is highly essential as it can help you make a decision about whether or not you should invest in the IPO.
Company research
Information on companies that are yet to be listed on the stock exchanges may be a little hard to come by, but that’s all the more reason for you, as a prospective investor, to get to know this information. Adequate and comprehensive research on the company and its background is essential before you even consider investing in its initial public offering. Typically, company research involves financial performance analysis to a large extent. However, your search shouldn’t end just yet. There’s another major factor that you should consider while conducting research about a company — corporate governance.
Your focus should also be on ensuring that the company coming out with an upcoming IPO has a clean corporate governance record. Any defaults or lapses in this aspect should be taken seriously as it can dent the company’s future. Corporate governance research can help you determine whether or not the initial public offering is a suitable investment opportunity.
Do not give into the hype
This is arguably the most important thing that you should keep in mind whenever you hear about an upcoming IPO. A major part of the initial public offering of a company is marketing. In order to attract the public into investing in an IPO, companies indulge in extravagant marketing techniques and typically spend lakhs to crores of rupees on this. They occasionally resort to using exaggerated statements to appeal to the public.
Some companies even use certain analyst reports to back up their claims. However, if you’re thinking about investing in an IPO, it is important to not give into the hype. Instead, it is a good idea to disregard the marketing strategies used by companies and instead conduct your own analysis to decide on the stance that you’re going to adopt when the initial public offering opens up.
Share valuation
Another important thing that you should consider when you hear about an IPO is the valuation of the shares of the company. Typically, companies going for an initial public offering tend to overvalue their shares. This is especially true with respect to companies that are already quite well-established and well-known to the public. While fixing the price band, companies tend to charge a premium over the original value of their shares.
And so, the onus is on you to determine whether the asking price is fair or overvalued or undervalued. You could use comprehensive valuation techniques such as the DCF method to analyze the intrinsic value of the shares. Or alternatively, you could use the price to earnings ratio or the price to book ratio methods as well. You could also compare the valuation of the shares with that of the company’s competitors to determine if the asking price is worth paying for.
Waiting is a good thing
Some investors are very quick to apply for upcoming IPOs as soon as they get wind of it. However, when it comes to investing in an IPO, patience sometimes holds the key to a good strategy. You don’t always have to be the first to apply. If the initial public offering is from a good, fundamentally stable company with strong growth prospects, you could always catch it in the secondary market once the initial furor subsides.
Also, by waiting until the IPO hits the secondary market, you get to analyze the market movement and gauge the demand for the stock before investing in it. Some IPOs of attractive companies may occasionally be listed at a discount to the cut-off price or experience a deep correction in the few days after the listing. By waiting patiently on the sidelines, you can avoid this volatility and protect your investment.
Conclusion
The decision to invest in an upcoming IPO is an important one that involves a great deal research. Therefore, it is a better idea to stay on the cautious end of the spectrum. Also, ensure that you always stay informed and base your decisions on your objectives, goals, and your levels of risk tolerance. This way, you can increase your chances of success in the long run.
Let’s take a look at companies that might be public soon.
ThredUp IPO (Forecast Q1/Q2 2021)
- Founded Date — 2009(HQ, Oakland,CA)
- Founders — Chris Homer, Dan DeMeyere, James Reinhart, Oliver Lubin
Funding traction, total raised ~$306M + secure transactions
- Series A — 2010 at val. $5.4M, $0.2 pps
- Series B — 2011 at val. $25.45M, $0.92 pps
- Series C — 2012 at val. $60M, $1.5 pps
- Series D — 2014 at val. $113M, $2.26 pps
- Series E — 2015 at val. $412M, $6.25 pps
- Series F — 2019 at val. $666M, $6.88 pps
Online Thrift Shop ThredUp Plans IPO Early Next Year (source)
Grofers IPO (Forecast Q3/Q4 2021)
- Founded Date — 2013 (HQ, Gurgaon, Haryana, India)
- Founders — Albinder Dhindsa, Saurabh Kumar
Total raised ~$608M + secure transactions
Funding traction — n/a
Rubrik IPO (Forecast Q3/Q4 2021)
- Founded Date — 2014 (HQ, PA,CA)
- Founders — Arvind Jain, Arvind Nithrakashyap, Bipul Sinha, Soham Mazumdar
Funding traction, total raised ~$554M + secure transactions
- Series A — 2015 at val. $43M, $0.67 pps
- Series B — 2015 at val. $200M, $2.45 pps
- Series C — 2016 at val. $630M, $6.85 pps
- Series D — 2017 at val. $1.3B, $11.85 pps
- Series E — 2019 at val. $3.3B, $23.55 pps
Illumio IPO (Forecast Q3 2021)
- Founded Date — 2013 (HQ, Sunnyvale,CA)
- Founders — Andrew Rubin, PJ Kirner
Funding traction, total raised ~$332M + secure transactions
- Series A — 2013 at val. $26M, $0.12 pps
- Series B — 2013 at val. $180M, $0.63 pps
- Series C — 2015 at val. $1.2B, $3.21 pps
- Series D — 2017 at val. $1.3B, $3.28 pps
- Series E — 2019 at val. $1.9B, $4.37 pps
Cybersecurity startup Illumio just raised $65 million and hired a CFO (source)
Coupang IPO (Forecast Q2 2021)
- Founded Date — 2010 (HQ, Seoul, Seoul-t’ukpyolsi, South Korea)
- Founders — Bom Kim
Funding history, total raised ~$3.4B
The SoftBank-backed start-up, recently valued at $9 billion, is reportedly eyeing an IPO as soon as 2021 (source)
Veeam IPO (Forecast Q2 2021 or 2022)
- Founded Date — 2006 (HQ, Baar, Zug, Switzerland)
- Founders — Andrei Baronov, Ratmir Timashev
Funding history, total raised ~$500M + secure tractions
Veeam CEO talks IPO, M&A (source)
To be continued…
👉 PART 1 👉 PART 2 👉 PART 3
👉 PART 4 👉 PART 5 👉 PART 6
👉 PART 7
About the Author
Mr. Koch — a serial entrepreneur and late-stage investor specializing in secondary shares.
Previously: Twilio, Xiaomi, iQiyi, Tilray, Livongo, Bandwidth.
Currently: Robinhood, Grab, Toss, Coursera, Epic Games, Chime, and other companies.
Contact — here, If you are a startup building in this space — email or DM me to be included on this article.
—
The content was collected from various open sources, approved by companies, and does not provide any one-stop recommendation for the purchase of shares. All data was used for only informational purposes and does not contain insider information that may be malicious or refuted by the company and SEC.
This communication does not represent an offer or solicitation to buy or sell securities. Such an offer must be made via definitive legal documentation by the buyer or seller of securities, please check the SEC rules before buying shares from any stock-suppliers.
