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 short-term rental site Airbnb in 2020. Here are five upcoming IPOs to watch in 2021:
Bumble is a dating and social networking app with more than 100 million users. The female-friendly platform puts women in charge of making the first move to start a connection and has become a significant competitor to its biggest rival, Tinder. It makes money through advertising and a premium subscription service.
Bumble’s IPO is set to launch in February 2021 after filing its registration last December. The estimated valuation is somewhere between $6 billion and $8 billion, making Bumble one of the most sought-after IPOs of 2021.
Anyone with small children will be familiar with the online gaming platform Roblox. The platform is hugely popular among children (the biggest demographic is between ages 9-12) and allows its users to create and develop their own games online. Roblox has 31 million daily active users and the platform earned more than $588 million in 2020.
Roblox filed its S-1 recently and the IPO is expected to hit the market in early 2021 at a robust $8 billion valuation.
The Wealthsimple Trade of the U.S., Robinhood is a free stock trading app that has exploded in popularity during the pandemic as bored, work-from-home day traders get into the stock market. Despite heavy competition in the commission-free trading space, Robinhood expects to fetch a valuation of around $11 billion if it goes public.
The largest cryptocurrency exchange in the U.S. is expected to go public in early 2021. Interest in cryptocurrency – led by Bitcoin and Ethereum – has reached a fever pitch as valuations soared last year. Coinbase has more than 35 million investors across more than 100 countries. The exchange provides a platform for users to buy and sell cryptocurrency as well as store their digital tokens.
Coinbase raised $300 million during its last funding round in 2018, valuing the company at $8 billion. Three years later, with a growing platform and heightened interest in cryptocurrency, Coinbase could be one of the hottest IPOs of 2021.
2020 was the year of online grocery delivery 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 $13.7 billion.
How To Invest in a New IPO
Online brokerages like Questrade and Wealthsimple Trade make it easy to invest in new IPOs. Both platforms have dedicated sections for IPOs and new issues. Here’s how to invest in new 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 current available inventory to be bought. For example, at this time there are three companies listed under open IPOs:
Name and industry Category Date added Flagship Communities REIT
Sep. 08, 2020 Northview Canadian High Yield Residential Fund - Class A
Equity Jul. 23, 2020 A-Labs Capital V Corp.
Equity May. 12, 2020
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 67 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 Bumble, Robinhood, or Instacart? 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 the first half of 2021. Who knows, maybe the next big stock will be going public soon.