Last updated: 2022-01-01

Initial Public Offerings

What is IPO, or Initial Public Offering? Why to invest in them, how to track them in Tickerverse and a look back at 2021.

Initial Public Offerings

In this blog post, I will explain what is IPO, or Initial Public Offering is. Then I will introduce our event 'IPO Completed'. And finally, summarize IPOs in 2021.

What is an IPO?

When a private company wants to raise more money (typically to expand, or make an acquisition), it can either issue debt, sell its shares to private investors, or sell its shares to the public on a stock exchange. The initial offering of shares to the public is called IPO (Initial Public Offering). To proceed with IPO, a company must fulfill several regulations and do a lot of prep. A company must submit a prospectus detailing the company's business, financial information, and risks to SEC. The IPO process is managed by investment banks, which are called underwriters and the main underwriter is called bookrunner. The company and the banks then approach some selected instutional investors to judge the investor interest, and determine initial offering price. Some smaller companies might avoid the complexity of IPO by listing OTC (over the counter) instead of major exchanges like NYSE or NASDAQ. Uplisting from OTC to exchange is sometimes also considered IPO.

There is also direct listing, which is similar to IPO (and for the public often interchangeable), but the company offers existing shares directly, without any underwriters.

Another popular way to get on a public exchange is via SPACs (Special Purpose Acquisition Companies) - blank check companies. SPAC does IPO but doesn't have any business plan on its own. Then the company that wishes to go public merges with the SPAC instead of doing its own IPO.

An important term is a lock-up period. The lock-up period is a predetermined amount of time following an initial public offering where large shareholders, such as company executives and investors representing considerable ownership, are restricted from selling their shares. Generally, a lock-up period is a condition of exercising an employee stock option. Depending on the company, the IPO lock-up period typically lasts between 90–180 days before these shareholders are allowed the right, but not the obligation, to exercise the option.

Tickerverse IPO Completed Event

Recently we added new event type "IPO Completed" in Tickerverse.

IPO Completed event type
New IPO Completed event type

You can include it in your filters.

We are finding new IPOs when they submit prospectus (Form 424B1, 424B3, 424B4, or 424B5) to SEC. We ignore the IPO of blank check companies (SPAC vehicles) as we think they are not interesting. Direct listings are included in our IPO Completed event.

Why would you, an event-driven investor, care about this event? First, it may be the first opportunity to invest in themes that were not previously available on public markets, like quantum computing or space exploration. Or, IPOs are often volatile on the first couple of days of trading, and you may want to take advantage of possible mispricing. At this moment we don't provide an event for the end of the lock-up period, but that may also be a good time to invest.

IPOs in 2021

In some ways, 2021 was a record-breaking year for IPOs, in terms of their number and size.

Graph of IPO Pricings in 2021
Graph of IPO Pricings in 2021. From [1]

However, many IPOs sizzled, and by the end of the year, the IPO index was down 10%. That was possibly caused by raising inflation, which is generally not good for growth stocks.

Renaissance IPO Index performance in 2021
Renaissance IPO Index performance in 2021

Some interesting or well-known companies had IPO in 2021

  • Couchbase

    Couchbase, Inc. engages in the development of document database management solutions. It offers its Couchbase platform to developers to build enterprise web, mobile, and Internet of things applications that support massive data volumes in real-time.

  • Coursera

    Coursera, Inc. is an online learning platform that offers anyone, anywhere access to online courses and degrees from universities and companies.

  • Gitlab

    GitLab Inc., through its subsidiaries, develops software for the software development lifecycle. It operates SaaS-based GitLab.com that allows users to create, review, and deploy code. The company also offers GitLab CI, a continuous integration and deployment tool; and Git repository management, code reviews, issue tracking, activity feeds, wikis, and others; and GitLab Serverless that enables enterprises to run serverless workloads on any cloud using Google's Knative. In addition, it offers consulting, training workshops, development, and other support services.

  • Rivian

    Rivian Automotive, Inc. develops and manufactures electric adventure vehicles. It offers five-passenger pickup trucks and sports utility vehicles. The company provides electric SUVs and electric pickup vehicles.

  • Roblox

    Roblox Corp. engages in the provision of online gaming services. Its platform consists of the Roblox Client, the Roblox Studio, and the Roblox Cloud. The Roblox Client is an application that allows users to explore 3D digital worlds. The Roblox Studio is the toolset that allows developers and creators to build, publish, and operate 3D experiences and other content accessed with the Roblox Client. The Roblox Cloud includes the services and infrastructure that power the human co-experience platforms.

  • Robinhood

    Robinhood Markets, Inc is a financial services platform that pioneered commission-free stock trading with no account minimums and fractional share trading. The firm is focused on providing retail brokerage and offers trading in the U.S. listed stocks and Exchange Traded Funds, related options, and cryptocurrency trading, as well as cash management, which includes debit cards services.

  • Samsara

    Samsara Inc. provides solutions that connect physical operations data to its Connected Operations Cloud in the United States and internationally. The company's Connected Operations Cloud includes a Data Platform, which ingests, aggregates, and enriches data from its IoT devices and has embedded capabilities for AI, workflows, and analytics, alerts, API connections, and data security and privacy; and applications for video-based safety, vehicle telematics, apps, and driver workflows, equipment monitoring, and site visibility. It serves customers across a range of industries, including transportation and logistics, construction, field services, utilities and energy, government, healthcare and education, manufacturing, and food and beverage.

  • Verve Therapeutics

    Verve Therapeutics, Inc. is a genetic medicines company engaged in the development of a new approach to the care of cardiovascular disease. It aims to transform treatment from chronic management to single-course gene editing medicines. Its goal is to disrupt the chronic care model for CVD by providing a new therapeutic approach with single-course in vivo gene editing treatments focused on addressing the root causes of this highly prevalent and life-threatening disease.

  1. renaissancecapital.com
IPO stock photo attributed to freekpik.com

Tags: Research | Tickers: BASE,COUR,RBLX,IOT,HOOD,VERV,GTLB | Author: David Nohejl