By Justinas Baltrusaitis
LAST year turned out as one of the best for initial public offering (IPO) by major companies despite facing tremendous uncertainty. However, some companies that forged ahead and launched their IPOs have recorded tremendous returns amid the global economic turmoil.
Data presented by Trading Platforms indicates that 2020’s top 10 IPOs raised about US$21.57 bil in total.
Vacation rental platform Airbnb had the largest IPO of the year after raising US$3.51 bil, representing about 16.2% of the total amount raised by the top ten IPOs. Chinese electric vehicle manufacturer Li Auto had the tenth biggest IPO by raising US$1.09 bil.
The amount raised by the top 10 IPOs of 2020 is about 8.5 times less compared to the top 10 biggest IPOs in history that cumulatively raised about US$184.65 bil.
Giant oil company Saudi Aramco has the biggest IPO in history at US$25.6 bil. Industrial and Commercial Bank of China Ltd (ICBC) has the tenth biggest IPO in history after raising about US$13.96 bil in 2006.
IPOs shake off pandemic’s economic impact
Despite the global coronavirus pandemic triggering the stock market crash and shattering the global economy, last year was one of the best IPOs in history.
The pandemic’s high escalation and the economic severity of the local lockdown measures delivered one of the worst market crashes in recent years.
Surprisingly, it was followed by a quick recovery of the stock market on the back of significant stimulus measures by governments with paused IPOs roaring back to life.
An overview of the top 2020 IPOs, highlights dominance by several technology companies. The sector is considered as one of the beneficiaries of the pandemic.
The returns and proceeds from the IPOs of these companies cement the fact that it was a strong year for the sector. In the second quarter, tech and biotech companies bounced back due to their demand in the pandemic.
The companies’ high returns was due to their ability to demonstrate strong growth in the future in cash flows coupled with low-interest rates.
As highlighted, companies that had delayed their IPOs in the first quarter re-emerged as the future looked positive.
Interestingly, despite booking dropping by about 90% at some point last year, Airbnb had the biggest IPO of 2020.
The company registered a remarkable rebound filing for the IPO during 3Q 2020 when the global economy showed recovery signs. The company bounced back partly due lifting of domestic travel restrictions as some customers chose to work remotely in Airbnb accommodations.
In general, 2020 was a boom for IPOs with notable drivers, including the rise of special purpose acquisition company (SPAC). SPACs are more established with high-profile companies going public through this vehicle.
Other drivers include the focus on technology, e-commerce, and healthcare that provided solutions in the course of the pandemic. Furthermore, companies listed last year benefited from low-interest rates, eventual economic recovery, and a rollout of vaccines.
2020 missed out on possible biggest IPO in history
Although 2020’s IPOs raised a significant amount, they still can’t match the top 10 IPOs in history. The biggest IPOs in history were mainly motivated by specific factors, unlike 2020.
For instance, Saudi Aramco became the biggest IPO in history after the county’s Crown Prince announced plans to modernise the Saudi economy and shed its oil dependence.
The firm’s listing was meant to help the gulf nation raise tens of billions of dollars to fund megaprojects and develop new industries.
Worth mentioning is that 2020 would have recorded the biggest single IPO in history. The cancellation of Ant Group’s planned US$37 bil listings was a setback for the sector. It brought to light the regulatory hurdles for tech firms, especially those with operations in China.
Moving forward, tech IPOs are expected to take center stage mainly due to the change in behaviour. Companies that had delayed their IPOs in 2020 will re-emerge boosted by the coronavirus vaccine and continued economic recovery. – Jan 27, 2021
Justinas Baltrusaitis is an editor, writer, and a downhill fan. He spent many years writing about banking, finances, blockchain, and digital assets-related news. He strives to serve the untold stories for the readers.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.