IPO Pulse: Updates On Airbnb, Robinhood, and More

 

We’ve seen 14 IPOs so far this month and another 9 set to go live today alone. News continues to pour in on some of the most anticipated IPOs of 2020. Read on to see which are on my radar and should be on yours, too.

We are on pace to have more companies go public in 2020 than we’ve seen in a single year in the past 20 years.

This kind of IPO activity points to healthy capital flow in the market.

As an angel investor, that gets me really amped up.

It means there’s greater potential for some of my investments to go public.

But beyond that, I keep a pulse on the IPO space because what I learn from the companies successfully going public, helps me spot opportunities in the private market with startups.

The past few days have brought some big updates on a handful of highly-anticipated IPOs including Airbnb and even Robinhood.

I break it all down for you and even share expected IPO dates in my latest edition of Angel Insights.

 

IPO News –– Week 3, November 2020

 

2020 has been a crazy year for exits, especially IPOs. Coming up around the bend, we have some of the most anticipated IPOs of the decade along with some totally unexpected ones.

In one way or another, the madness of 2020 has shaped these businesses. While some have had their hands forced and now turn to the public for capital to survive, others are going into their offerings as strong as ever.

 

DoorDash

 

With lockdowns and social distancing came a huge spike for delivery services. One of the biggest winners of this trend is DoorDash which became a household name overnight by delivering food from restaurants right to customers’ doors.

Now, DoorDash is all set up to go public with a valuation of around $16 billion.

While this has been the company’s biggest year it was also by far its most expensive. The first nine months of revenue in 2019 amounted to $587 million. Over the same period in 2020, that number was $1.92 billion. DoorDash made over 543 million total orders this year alone.

Scaling to meet the demand takes loads of capital. Now moving away from its insane boom and into a stabler, more sustainable future, it turns to the public markets for help.

And there are still a few challenges ahead of the delivery giant.

Starting January 1, 2021, new legislation will only allow DoorDash to deliver food from restaurants that explicitly give permission.

Another issue, the company has been struggling with its reporting and accounting controls. The audit that comes with filing an S-1 showed that the company didn’t have adequate processes and controls for cash reconciliation in 2018 and 2019.

Still, the future looks promising. DoorDash has the number one spot in its market and is doing well with its testing of DashMart, an expansion of service that sees the company delivering convenience-store items and prescriptions in addition to prepared food.

DoorDash is expected to IPO in mid-December 2020 and will trade under the ticker DASH on the NYSE.

 

Airbnb

 

Airbnb has officially submitted its filing to the SEC. This means that one of the most anticipated IPOs of the decade is now in the works.

This comes after a tumultuous few months for the rental app. It struggled when COVID-19 put a halt on travel activity. Airbnb’s gross booking value went down 40% and its revenue declined more than 30% year over year.

To stay afloat, the company had to cut its workforce, slash executives’ salaries, and even dock the founders’ paychecks.

After getting through the worst of it, Airbnb managed to pull together a profitable third quarter to the tune of $219 million from a revenue of $1.34 billion.

Though the near-future is still a challenge for the company, this IPO is a tactical plan. The strong capital injection will help it trudge forward.

Airbnb plans to list on the NASDAQ Global Select Market with the ticker symbol ABNB; an offering led by Goldman Sachs and Morgan Stanley. Based on its last round of funding, Airbnb could go into the IPO with a valuation of around $18 billion.

This is a far cry from its previous valuation of $30 billion, but it’s still an incredibly high one.

An interesting note: the world’s wealthiest human, Jeff Bezos, was an early investor in Airbnb. He could see a return of tens of millions from small angel investments he made in Series A and B rounds in 2010 and 2011—not that the gains will mean much to a man worth $184 billion.

 

Instacart

 

Another delivery giant, Instacart delivers groceries right to your doorstep, and will soon deliver a massive IPO.

In 2020, orders increased by 500% and the company earned $525 million in funding.

When businesses are met with such insane opportunities, many falter. Instacart, however, is managing nicely and will catapult off of this success into a huge IPO at a pricey valuation.

The company was valued at $17.7 billion in October and has announced that Goldman Sachs will lead the offering in 2021.

Instacart (along with DoorDash) benefited from the recent legislation in California that establishes app-based delivery drivers as independent contractors. Proposition 22 affirms that gig workers who deliver for Uber, Lyft, Instacart, and the like, are not employees, and thus aren’t entitled to receive full benefits and labor protections.

If the vote had gone the other way, dozens of delivery services would have been slapped with some hefty expenses. This victory is cited as a catalyst for Instacart’s decision to go public.

Similar to DoorDash, Instacart is branching off into other types of delivery. Having started with just groceries, it’s now testing deliveries from Walmart, Sephora, and 7-Eleven.

Instacart has not established an IPO date but it’s expected sometime in early 2021.

 

Petco

 

The long-running pet-supply company, Petco, is filing for an IPO for the third time in its history. Petco has a unique rollercoaster-ride story leading up to a very surprising 2020.

Petco was founded way back in 1965 as a mail-order company for veterinary supplies. In 1994, the company went public for the first time. Just six years later, private equity firms TPG and Leonard Green acquired the company, taking it private in a $600 million deal. Two years later, Petco went public for a second time. Four years later, in 2006, the same firms bought the company again, making it private this time in a $1.7 billion deal.

You really can’t make this stuff up.

The final change of hands happened in 2016 when the private Petco was sold to new private equity firms, CVC and CPP Investment Board, for $4.6 billion.

Fast forward to today, 2020 hasn’t been as bad for the company as many predicted. During initial pandemic scares, consumers bought loads of extra pet food fearing shortages. This drove dog and cat food sales up over 50%.

The company was allowed to keep its doors open throughout the lockdown. Because the retailer accounts for almost 33% of all cat and dog food sales and about 50% of fish and other types of pet food, the business was deemed essential. While modest, the continued sales helped to keep the business afloat.

And just recently, Petco launched a new service called Vital Care, a subscription plan and health insurance plan for pets, that has found initial success.

The company is now confidently heading into an IPO for the third time at a valuation of around $6 billion. No IPO date is currently set.

 

Robinhood

 

Finally, we have the latest and greatest trading platform that has tapped into a neglected market: millennial and Gen Z investors.

The startup, founded by two Stanford grads, already has 13 million users on its platform. The app allows users to trade options, gold, cryptocurrencies, equities, and funds.

Robinhood is currently searching for underwriters to lead an IPO aimed at Q1 of 2021.

This comes on the heels of a Series G round of funding that earned $460 million, bringing Robinhood up to an $11.7 billion valuation. Its investors include Sequoia Capital, D1 Capital, Andreessen Horowitz, and DST Global, among others.

This year has been very kind to Robinhood. With loads of stay-at-homers turning to investing as a way to thrive (and pass the time), the platform has seen a boom of activity. Even more, the COVID era has been essential in winning many younger users, a notoriously elusive market for any financial company.

While 2020 has been a year of growth, it was not without its problems.

Consumer protection agencies received an abnormal number of complaints about the company, around four times more than its competitors. These complaints aren’t anything serious—mostly just upset and inexperienced investors that are confused as to why they lost money—but it’s an issue the company needs to address.

Much more serious, the info on around 2,000 accounts was stolen by hackers recently. Up to 10,000 total accounts may have been compromised.

But, after pushing through these issues, the company is still strong. The fresh capital injection provided by the public market will allow Robinhood to avoid future issues through better education for users and improved security across the platform.

 

Takeaways

 

Keep a pulse on the IPO space and seeing what some of the most successful companies are doing leading up to their going public, can help you spot promising startup opportunities that come your way.


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