An Initial Public Offering or IPO represents the first time a company makes its shares available for trade on a stock exchange. Private companies can use IPOs to raise capital and fuel future growth, and hundreds of companies go public most years, presenting an opportunity for interested investors.
The number of IPOs per year varies, depending on market conditions and the ease with which companies can raise capital via other methods. Looking at IPO statistics can offer some perspective on how frequently companies decide to go public and which sectors tend to see the biggest launches.
Number of IPOs by Year
A look at IPO history shows that the number of initial public offerings fluctuates greatly by year and by decade. The last two decades have seen nearly 4,700 IPOs. Here’s a look at IPO filings by year for that time frame:
|Year||Number of IPOs|
The number of IPOs in any given year tend to follow movements in the economic cycle. In 2008, for example, there were just 62 IPOs as the economy faced a historic housing crisis. IPO activity didn’t pick up the pace again until 2010, once the Great Recession had ended.
Previous Year IPOs
Companies were more likely to go public in the 1980s and 1990s than in more recent years. Between 1980 and 2000, an average of 311 firms went public each year.
IPO activity spiked in the mid-90s as entrepreneurs sought to join the growing dotcom bubble.
Meanwhile, an average of 99 firms went public each year between 2001 and 2011. In recent years, larger, more established companies appear likelier to go public than smaller private firms.
Largest IPOs in 2021
As of mid-November, there had been 991 initial public offerings in 2021, nearly double the number that went public in 2020, and nearly quadruple the number of IPOs in 2019.
In addition to a booming stock market, one of the factors driving IPOs in the last two years has been the increase in IPOs for special-purpose acquisition corporations (SPACs).These are essentially holding companies that go public with the sole purpose of acquiring another company.
Here are the top 10 largest IPOs for 2021 so far, based on market capitalization at the time the company went public.
|Company Name||Market Value (at IPO)||IPO Date|
|Rivian Automotive Inc||$66.5 billion||11/10/21|
|Didi Global Inc||$60.96 billion||6/30/21|
|Coupang Inc||$60.03 billion||3/11/21|
|Robinhood Markets Inc||$31.92 billion||7/29/21|
|UiPath Inc||$29.27 billion||4/21/21|
|AppLovin Corp||$28.64 billion||4/15/21|
|GlobalFoundries Inc||$26 billion||10/28/21|
|Full Truck Alliance Co Ltd||$20.64 billion||6/21/21|
|Toast Inc||$20.10 billion||9/22/21|
|RLX Technology Inc||$18.64 billion||1/21/21|
Evaluating performance of stocks after a company goes public can give you an idea of how successful IPOs tend to be overall. Though it’s important to keep in mind that it’s impossible to predict with absolute certainty whether an IPO will be a boom or a bust.
Sectors With the Most IPOs in 2021
IPO distribution varies across stock market sectors. Some sectors churn out more IPOs per year than others. In 2020, for instance, some of the biggest IPOs belonged to companies in the tech sector, with financial services and health care not far behind. In 2021, technology, industrials and health care have dominated the IPO landscape on a global scale.
The technology sector includes a variety of industries, such as computers, electronics, internet software and services, IT consulting, semiconductors and computer software. This sector also includes tech companies that manufacture electric vehicles or EV components.
The industrials sector includes industries related to aerospace and defense, automobiles and automobile components, machinery, building/construction, engineering, transportation and infrastructure.
The health care sector includes biotechnology companies, health care providers, pharmaceutical companies and health care equipment suppliers and manufacturers. Managed health care facilities also fall under this umbrella.
The IPO Process
Companies need to follow several steps in order to go public. Here’s a brief overview of of the steps in the IPO process:
1. Choose an underwriter or group of underwriters (usually an investment bank registered with the SEC to offer underwriting services).
2. Complete IPO due diligence, including a deep dive into the company’s financials and the background of upper management.
3. SEC review and road show, in which the company markets its IPO to potential investors.
4. IPO pricing, wherein brokers underwriters work with the company to determine its initial stock price.
5. Launch, when the company goes public and shares trade publicly for the first time.
6. Stabilization, the 25-day period during which the underwriters help maintain the stock’s price.
7. Transition to market competition as the underwriters stop supporting the price.
Why Do Companies Go Public?
The process of going public takes time and financial resources. But there are many reasons that private companies might choose to go that route.
For many companies, an IPO affords an opportunity to raise capital from investors. They can use this capital to fund further growth and expansion, potentially driving bigger profits down the line.
Exit for early investors
If a company received funding from angel investors or venture capitalists, an IPO offers an opportunity for them to give that money back. As a shareholder, early investors can sell their shares on a secondary exchange following the IPO.
Private companies may also use an IPO for employee hiring and retention. By including shares of company stock in an employee benefits package, it may be easier to attract and retain top talent.
Going public can raise a company’s credibility in the eyes of the marketplace. That could help attract new investors and new customers, which fuel further growth.
Investing in IPOs
It’s possible to invest in IPO stocks through an online brokerage account. To do so, you’ll first need to find a brokerage that offers IPO investing, as not all of them do.
The next step is reading through the IPO prospectus. This document offers information about the company, though you may still want to do some independent research of your own. Specifically, you may want to consider the structure of the company’s board, the estimated IPO price, the company’s size, estimated valuation, annual revenues, and other fundamentals and financial ratios.
Recommended: How to Read Financial Statements: The Basics
This can help you decide if the company aligns with your risk tolerance and goals before you invest. If you’ve determined that you want to invest in a particular IPO, you’d simply have to place the order with your broker. That requires telling your brokerage which IPO stocks you want to buy, how many shares, and what type of order to place. Otherwise, the process of buying IPO shares is fairly similar to that of buying shares of stock that are already traded on the market.
Looking at IPO statistics and IPOs by year can help you track trends and understand just how often companies go public. If you’re interested in adding IPOs to your portfolio, it’s also important to know which sectors tend to have the most and least IPO activity.
Once you’re ready to invest, you can do so through an online brokerage account. SoFi members, for example, have access to IPOs and pre-IPO listings from a variety of companies. To access them, you’ll need to open an account on the SoFi Invest brokerage platform.
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.