Despite the near-constant upheaval caused by the coronavirus pandemic, 2020 will go down as one of the best performing years for initial public offerings (IPOs). Over the last 12 months, a stunning 216 companies went public, the most since 2014, with firms raising an astonishing $78.1 billion in the process.
Consistent with previous years, healthcare and technology were the most popular sectors of the IPO market. Airbnb (ABNB), Doordash (DASH), Snowflake (SNOW), Lufax Holding (LU), and Royalty Pharma (RPRX) were the largest companies to go public this year.
And 2021 looks like it could be just as good for public debuts, according to Kathleen Smith, IPO ETF manager at Renaissance Capital.
“As long as the market holds up, we could very likely see a better year in 2021 than we saw in 2020,” Smith told Yahoo Finance. While the IPO market started out strong in 2020, the pipeline essentially closed down in March because of the pandemic before picking up steam again in the second half of the year. Momentum looks promising heading into the new year, assuming the Federal Reserve’s easy money policy stays intact for the foreseeable future.
Overall, this year’s slate of public offerings performed extraordinarily well during and after their IPOs. The Renaissance IPO ETF (IPO) is up 119% this year compared to the S&P’s overall 14.3% gain, logging its best year ever. The average return on a U.S. IPO this year was 75.4%, compared to last year’s 24.4% and 2018’s -1.9% loss.
With two COVID-19 vaccines now authorized in the U.S., one potential shift is a so-called return to normalcy that may not favor growth-oriented healthcare and tech companies, and instead may benefit cyclical names that aren’t as high-flying. “We can’t be so sure that the tech IPOs will be the ones at the top of the 2021 list. The minute there’s any kind of worry, markets correct and deals get priced more conservatively and they don’t get done,” Smith said.
2021’s big-name companies range from communication services and consumer discretionary to fintech and materials. Juggernauts like gaming platform Roblox, buy-now-pay-later retailer Affirm, and chemicals and equipment company Atotech are each poised to raise as much as $1 billion. And there are plenty of other firms waiting in the wings.