Apr 03, 2022
The prospect of a firm going public is enticing. It's possible to make a fortune with the next Amazon (AMZN) or Tesla (TSLA) stock if you buy and hold the correct stock at the appropriate time (TSLA).
Potentially, all of them may have the same amount of sky-rocketing potential. However, there is one major caveat: If there is one Apple (AAPL), numerous new publicly traded firms lose their stockholders a fortune. 60% of new publicly traded firms had negative returns after five years between 1975 and 2011.
If you decide to invest in IPOs, you should only commit a tiny portion of your portfolio to this type of investment. Investing in a single stock is subject to this rule: Experts urge that you avoid investing vast sums of money in a single firm, no matter how well-known it is or how long it has been on the New York Stock Exchange (NYSE).
Based on their high values and attention-grabbing names, these firms may be the most talked-about new IPOs in several months. Many of them are well-suited to prosper in a post-Covid economy with so many services to offer.
As a leading provider of payment processing services, Stripe's fortunes have been excellent. During its most recent investment round in early 2021, the firm raised $600 million and was valued at an astounding $95 billion. Stripe's IPO might be one of the biggest in history because of the pandemic surge in e-commerce demand, which hasn't slowed down since.
Klarna, the market leader in Sweden's buy-now-pay-later market, raised $640 million, valuing the company at close to $50 billion. Over the past century, Klarna has reaped the rewards of customers' longing to spread the cost of primary and small purchases over a regular monthly installment. Customers worldwide were unable to leave their homes and were keen to purchase online in 2020, leading to record sales for Klarna. Keeping the momentum going when Covid fades from view will be critical.
During Covid, e-commerce grew well beyond the confines of brick-and-mortar stores. After its previous financing round in August 2021, online bank Chime was valued at $25 billion. Still, Goldman Sachs has been appointed to handle the company's IPO, which may value the company far more than that.
Chime is rumored to be aiming for a $40 billion value. In the low-rate environment that has persisted since the Great Recession, banking is a challenging ring to break into with many entrenched players.
Delivery of groceries through the internet An IPO for Instacart, a grocery delivery service that had been widely expected to go public late in 2018, was postponed to focus on expanding the business.
An initial estimate of the corporation in early 2021 put it at a whopping $39 billion—but by March 2022, it had lowered that to $24 billion to better cope with the changing landscape of the industry.
Having benefitted from Americans remaining at home during the epidemic, Instacart is now seeking to broaden its products as the market's interest in work-from-home companies diminishes since instances of Covid-19 are now declining rapidly.
All businesses are obsessed with big data, no matter what industry. Databricks has established itself as a top provider of database administration, artificial intelligence (AI), and data visualization technologies. According to the company's estimates, there are more than 5,000 clients in 19 countries, and it expects to produce $1 billion or more in sales by 2022.
Launch of a Web-based Chat Window Microsoft was interested in buying Discord for $10 billion, but the deal never went through. There was an additional investment round in September of 2021 that brought the company's worth to $17 billion.
Discord hasn't made any announcements about going public, but it has a healthy amount of cash on hand, thanks to its most recent investment round. The popularity of gaming has soared due to the app's ability to connect players in real-time. The corporation has 140 million monthly users, generating a yearly income of 130 million dollars.
As previously said, the most notable feature is the ability to raise money. R&D, capital spending, and debt repayment are examples of how capital may be used.
Another benefit of an IPO is that the company's products are made available to a broader audience of prospective consumers, leading to more significant sales. As a result, the company's share of the market may rise.
An IPO can also be utilized as a departure plan by the founders. In many cases, venture capitalists have leveraged IPOs to profit from the success of firms they aided to start up.
As a result, public corporations may be more concerned with short-term outcomes than long-term growth due to the additional pressure from the market. Investors are continually on the lookout for ways to make more money.
Therefore the management of a firm is constantly under the microscope. This might lead to the deployment of dubious methods by management to improve profits.