When a private company decides to “go public,” it files for an initial public offering (an IPO) and sells shares in its business to the public for the first time. IPOs can make company founders and insiders extremely wealthy, as it gives them the opportunity to turn their shares into cash by selling them on the open market.
If the prospect of buying into a new IPO gets you excited, here are some upcoming IPO stocks to watch and consider for your next investment.
Upcoming IPOs to Watch
While the Canadian IPO market remains quiet, the U.S. IPO market is heating up after the successful launch of Snowflake, DoorDash, and the short-term rental site Airbnb in 2020, followed by Coinbase and Bumble in early 2021. Here are five upcoming IPOs to watch for later in 2021:
You probably know Robinhood as the commission-free stock trading app that’s been making a name for itself in the U.S. It’s eight years old and has millions of users, who are usually retail investors and millennials. And because of Robinhood’s popularity, other brokerage firms have since eliminated commissions too: Schwab, E-Trade, Fidelity, and others have all jumped on the cost-cutting bandwagon. So entering 2021, Robinhood was one of the hottest IPOs.
But Robinhood’s popularity took a hit when they banned people from buying GameStop and other stocks. Many people began boycotting Robinhood, and Wall Street also criticized it. Afterward, Robinhood raised $3.4 billion by asking for money from investors and borrowing some more.
Robinhood might be public by the end of this year. It might even happen in the second quarter, but it’s not definitive. We also do not know what the value of this will be, but The New York Times projects that it could be as much as $8.3 billion. So if you’re an investor who hasn’t completely abandoned Robinhood, this is one IPO to watch.
Nextdoor is an app that brings people together in their local neighbourhoods. It is a private social network that enables neighbours to discuss what’s going on around them and share valuable information. Nextdoor can be downloaded as an app or accessed through Facebook Messenger (yes, a Facebook account is required).
And now, Nexdoor wants to be publicly traded. They want to decide on the way to go public, too. They can do this either with an IPO (a direct listing) or merge with another company to become public. Nextdoor is looking at a valuation of as much as $5 billion.
Nextdoor has not made public its financials, but it’s estimated to be valued at as much as $5 billion. It also has the backing of many businesses. These businesses are big names like Kleiner Perkins, Greylock Partners, and Tiger Global Management.
Stripe is a U.S.-based company that offers software for businesses to process payments and make it easier for customers to pay them online with credit cards, debit cards, or via bank transfers.
If Stripe goes public, it could be the most valuable company of the year to make this jump. The company that sells payments processing software is going to have a significant IPO in 2021. It has already raised a lot of money and recently got a high valuation at $95 billion — even higher than all the other companies mentioned.
Stripe has the power to stay private. It might not go public in 2021, but people will want to buy it when it does.
This is a company that sells technology and analytics. As rumour has it, ThoughtSpot might go public in 2021. Unfortunately, there are not yet any official financial numbers for investors to look at. But the most recent publicly-reported revenue numbers show that it slowed down from 108% growth last year to 88% in the first quarter of this year.
The company has not raised money since August 2019. They took $248 million, and the company was valued at $1.95 billion. Customers include Walmart, Disney’s Hulu, and 7-Eleven.
2020 and 2021 have made online grocery delivery mainstream and Instacart is poised to cash in on its soaring popularity with an IPO launch in the near future. While no public filing has been made yet, Instacart’s most recent private market valuation is pegged at $39 billion.
Investing in IPOs in Canada
Online brokerages like Questrade and Wealthsimple Trade make it easy to invest in IPOs. Both platforms have dedicated sections for IPOs and new issues. Here’s your cheat sheet on how to invest in IPOs in Canada:
Buying IPOs on Questrade
Open a self-directed account at Questrade and visit the IPO centre to view all available IPOs and new issues. Make sure to read the prospectus before purchasing. You can even subscribe to Questrade’s IPO bulletin and get an email when new IPOs are announced.
Questrade lists all IPOs currently open (and closed). Open issues show all currently available inventory to be bought. As of May 11, 2021, here are the companies currently listed as open IPOs:
Buying IPOs on Wealthsimple Trade
Open a self-directed account on the Wealthsimple Trade commission-free trading platform and you’ll find all newly issued IPOs by tapping the search icon and looking for Recent IPOs. This is where you can see all the latest private companies that have gone public.
At present time, it lists 68 recent IPO stocks ranging from TSX and TSX Venture stocks, and American stocks trading on the NASDAQ or NYSE.
Note that Wealthsimple Trade does not allow you to hold USD and so any U.S. listed stocks that you buy will be purchased in Canadian dollars and subject to currency conversion fees (Wealthsimple’s corporate rate + 1.5%).
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Can You Buy U.S. or International IPOs Pre-Market?
Looking to get in on the ground floor with Instacart or another international IPO? Prepare to be disappointed. Most foreign IPOs are not available to Canadian residents because U.S. and international companies don’t typically file the documentation necessary to market a new issue in Canada.
What this means is that Canadian investors typically can’t get in on the pre-market IPO, where shares are typically handled by insiders, and won’t be able to buy shares until they become available on the public market.
There’s something about a new IPO that gets investors excited every time. We’ve all wished we bought Microsoft, Amazon, Facebook, or Shopify when their shares first went public, and with every IPO, there’s a chance to find the next big thing.
Tempting as it is, don’t put all your eggs in the IPO basket. Like cryptocurrency, gold, or any other speculative investment, limit your exposure to 5% of your portfolio (or so) and only an amount you’re willing to lose.
Keep an eye out for a flurry of IPO activity in 2021. Who knows, maybe the next big stock will be going public soon.