- Some of the hottest private consumer tech companies are rushing to file their IPO prospectuses so they can go public before the end of the year.
- Airbnb, DoorDash, Roblox and Wish are all expected to make their filings public by early next week, said people familiar with the matter.
- It's already been a big year for tech IPOs, most notably in September, which was the busiest year on record for the New York Stock Exchange.
The holiday season is shaping up to be a celebratory time for tech IPO investors.
Between early and mid-December, public investors will likely get their first crack at buying stock in food delivery provider DoorDash, e-retailer Wish and kids gaming company Roblox, according to people familiar with the matter. Airbnb is also expected to file its prospectus by early next week, putting the room-sharing company in position to hold its market debut after Thanksgiving, said two of the people.
Filings are expected by next week, though the timing could change based on market conditions, said the people who asked not to be named because their plans are private.
All four companies confidentially filed paperwork with the SEC this year, setting the stage for eventual public offerings. DoorDash announced its submission in February, followed by Airbnb and Wish in August and Roblox in October. Because the virtual roadshow has become commonplace during Covid, companies only need a couple weeks to meet with investors before their debuts.
Representatives from each of the companies declined to comment for this story.
Despite an economic crisis, tech IPOs are red hot, reflecting a sector that's outperformed the market in the face of a global pandemic, which has killed over 240,000 Americans, while investors also navigated the uncertainty of a presidential election. Stocks rallied after Joe Biden's electoral defeat of President Trump, giving tech companies that were surveying the market further incentive to go out now, said Kelly Rodriques, CEO of pre-IPO marketplace Forge.
The sector's strong performance has convinced all four companies to push forward with going public now before conditions change. There are about a dozen other global tech companies that could raise at least $1 billion in an offering that are preparing for 2021, according to a person familiar with the matter.
"There's a bunch of pent-up demand," Rodriques said. "A lot of people were waiting to see how the market would react in a Biden victory." Rodriques said he's not aware of any of the four companies' plans.
During the Covid-19 pandemic, software, e-commerce and gaming companies have been among the biggest beneficiaries of a surge in spending on goods and services that cater to people who are home all day due to office and schools closures. Investors have poured money into stocks like Zoom for videoconferencing, Cloudflare for website security and Etsy for online retail.
An earlier IPO spurt in September included a share sale from cloud database vendor Snowflake, which raised a record amount of money for a software company. That was during the New York Stock Exchange's busiest month on record. Gaming company Unity went public the same week as Snowflake, while software makers Palantir and Asana both held direct listings soon after, enabling existing shareholders to sell stock to public market investors.
In most of the tech deals so far this year, the gains have primarily been gobbled up by the few investors who were able to get in at the IPO price and benefit from the pop. Snowflake, for example, more than doubled out of the gate but is trading below its opening day close. Software developer Sumo Logic and insurance tech company Lemonade have also dropped form their initial pop.
Unity and Palantir are the exceptions, and neither went the traditional IPO route. Unity's top executives controlled the pricing and allocation of the company's offering and allowed employees to sell a portion of their shares right away rather than waiting for the lockup to expire. Palantir's stock is up almost 60% since its direct listing, which didn't produce a pop because no new shares were sold.
Between the companies set to go public this year and into 2021, many are exploring Unity's structure as well as other options like direct listings and special purpose acquisition companies, or SPACs, said people with knowledge of the pipeline.
How Covid changed their business
Airbnb is the best-known name of the group that's preparing to hit the market now, though it's also had the rockiest year. Coming into 2020, Airbnb was prepping for a blockbuster IPO. But the pandemic put a halt to travel, forcing Airbnb to cut 1,900 jobs, or about 25% of its workforce, raise $2 billion in high-interest debt and slash its valuation by 16% to $26 billion.
That was in April and May. In recent months, Airbnb has been able to reignite growth as travelers hit the road to seek out vacation homes off the beaten path. According to Airbnb, hosts in rural areas of the U.S. earned over $200 million in June, an increase of more than 25% from the prior year. Still, Bloomberg reported in August that revenue in the period ended June 30, dropped at least 67% from a year earlier, to $335 million.
DoorDash, valued by private investors at $16 billion, has been one of the top winners from consumers sheltering in place. Many restaurants have turned to delivery as their main source of revenue, and DoorDash has expanded its lead in the market. According to data from analytics firm Second Measure, the company earned 49% of U.S. meal delivery sales in September, more than double Uber Eats, which captured 22% of the market.
The election was also a major boon for DoorDash, though not because of Biden's victory. Voters in California, DoorDash's home state, passed Proposition 22, which allows gig economy companies to continue classifying their drivers as contractors. For DoorDash and grocery delivery provider Instacart, a likely 2021 IPO candidate, the ballot box victory cleared the path for their public offerings.
Roblox has been around for 14 years, but it's never had a year like 2020. The company's gaming app features millions of titles created by and for kids. Users build their own avatars, which they can move between games, buying digital currency along the way for in-app purchases. They can also rent a private server to host a virtual birthday party or other celebration.
As of April, Roblox expected $1 billion in billings this year. According to research firm SensorTower, player spending topped $100 million a month for the first time in May. Reuters reported last month that the company expects to double its recent $4 billion valuation in its IPO.
Wish was valued at $11.2 billion last year and has continued gaining momentum through its online marketplace that offers its more than 70 million active users discounted goods in categories like home goods, apparel and electronics. The company, which competes with Amazon, has also faced complaints from Wish users who claim the site hosts shady merchants and poor quality products.
Forge's Rodriques said that while there's a tight window to try and go public this year, the outlook for 2021 is looking good. With prospects of a coronavirus vaccine on the horizon and election volatility mostly behind us, there will likely be plenty of opportunities for the many private tech companies valued in the billions of dollars to test the markets at a later date, he said.
"I think we could see 2021 be an absolutely booming year on a number of fronts," Rodriques said.