IPOs Boom Amid a Stock Surge
A Slew of Companies File for IPOs
The initial public offering market is booming after taking a back seat to SPAC deals in 2020. This week alone has already seen 18 companies file for IPOs with the Securities and Exchange Commission. They run the gamut from Chinese ride-hailing startup DiDi Global to cybersecurity company SentinelOne. The last time this many companies filed for an IPO in a week was in 2004.
The surge of public debuts is because companies want to take advantage of a robust stock market and because the second quarter is coming to a close. If they wait until the third quarter begins, firms have to file updated financials.
IPO Market Expected to Stay Busy
The IPO market has been strong throughout 2021 with 213 companies going public in the first six months, raising more than $70 billion. This activity is reminiscent of the dotcom boom from 1996 to 2000, and is happening despite competition from SPACs for investors’ attention.
Currently there are about 87 companies aiming to raise a total of over $20 billion through IPOs. There is also a bevy of private companies that have not yet filed with the SEC but are expected to do so soon. That is driving optimism that the IPO market’s strength will continue at least through the end of the year.
Stocks Making a Comeback in 2021
The surge in IPOs comes as the stock market is seeing growth, with the S&P 500 up 14% so far this year. For context, the S&P 500 was down 4% at this point last year. While investors piled into stay-at-home stocks like Netflix (NFLX) and Amazon (AMZN) during the pandemic, their interest is shifting back to industrials like Marathon Oil (MRO), which is up more than 100% thanks to rising oil prices, and Nucor (NUE) which is up 80% because of surging steel prices.
As the year progresses, investors will need to pick and choose their investment strategies. For example, oil may be a good bet now, but it is not clear if trends in oil prices will continue. Amazon may be too pricey for some investors now, but its fundamentals could catch up with its stock price. It is likely that as consumer habits change and the economy recovers from the pandemic, the stock market will be in for some twists and turns in the second half of the year.
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