IPO Boom Expected to Continue into 2021
Despite the uncertainty of 2020, initial public offerings (IPOs) in the US set records in 2020, recording 407 IPOs that raised a total of $145 billion. The 2020 IPO boom more than doubled the 195 IPOs recorded in 2019 that raised a total of $56 billion. Special purpose acquisition companies (SPACs), which made up 230 IPOs, influenced the bulk of the IPO activity in 2020. Although most of the SPACs have not yet completed their mergers, the completed SPAC mergers in 2020 showed a 41 percent return. Excluding SPACs, traditional IPOs raised $83 billion across 203 issuers, again representing the strongest IPO market in two decades.
Although retailers made up only a small portion of the IPOs in 2020, the number of retail IPOs has increased year over year, and we expect this trend to continue into 2021. For example, mattress retailer Casper filed its IPO in February. As market volatility decreased, more retailers announced plans to go public. In September, Poshmark announced its plans to go public. The clothing reseller eventually completed its IPO in January 2021, raising $277 million in the offering. Pet retailer Petco consummated its IPO in early 2021, raising $864 million. Further, in December 2020, Barkbox, an online pet subscription service, announced its plans to enter the public markets via a $1.6 billion SPAC merger, which is expected to be completed in 2021.
The strong IPO market has continued into 2021, which could be good news for retailers. As of early February, US markets had recorded 189 IPOs, a significant increase from the 26 IPOs recorded in the same period in 2020. Following the SPAC trend from 2020, most issuers entering the public markets this year have done so by merging with a SPAC, rather than through a traditional IPO. In a record-breaking first week of 2021, 28 SPACs went public, raising over $6 billion. In February 2021, one of the largest shopping mall operators in the US announced its plans to raise up to $300 million by forming a SPAC, which it believes will “support delivery of innovative solutions to elevate and reinvent shopping and transform retail.”
Market experts predict the US market’s strong IPO performance will continue through 2021, as low interest rates and investor enthusiasm remain. A COVID-19 vaccine becoming more readily available in 2021 may also help strengthen the opportunities for privately held retailers to enter the public markets.
Chelsea Lomprey wrote this article.