San Francisco Chronicle - (Sunday)
Bay Area’s rare IPO rollout in December
Five Bay Area companies whose fortunes were transformed by the pandemic — Affirm, Airbnb, DoorDash, Roblox and Wish — are heading to Wall Street for initial public offerings this month.
“If you rolled back the clock to March and predicted (all this) IPO activity, people would have thought you were crazy,” said Robert Hendershott, a professor of finance at Santa Clara University. “In March it looked like Airbnb might be doomed and the IPO window would be closed for at least a year.”
Instead, Wall Street is having a riproaring year, including a huge
rally after the election. Vacationrental market Airbnb is rebounding from pandemic setbacks with more people living and working as digital nomads. And other companies are benefiting from customers stuck at home playing, shopping and ordering meals online.
The strong stock market, combined with the unusual circumstances of 2020, have added up to a rush of public offerings that could fortify companies with cash as they face the prolonged uncertainties of the health crisis.
“The stock market is at an alltime high; that explains why a fair number of decacorns are going public now,” said Jay Ritter, a finance professor at the University of Florida, using the jargon for a company worth more than $10 billion.
“The point of an IPO is to get the highest price for your stock,” said Scott Willis, head of research at Grizzle, a financial media website. “It’s a great time to go public now, when valuations are really high and everyone is bulled up on stocks.”
Airbnb experienced a painful contraction when shelterinplace hit and people stopped traveling. It laid off a quarter of its workforce and alienated some hosts with its cancellation policies. But it has since regained some ground as whitecollar workers rent rural retreats to work from home. It notched less revenue this year than last, but its thirdquarter bookings were higher than they were two years ago.
Other preIPO companies had dramatic pandemic boosts. As food delivery became paramount for many homebound people, restaurant meal service DoorDash tripled its revenue in the first nine months of 2020, compared with the same period last year.
Roblox, which makes online multiplayer games for kids, was eagerly embraced by teens and younger children stuck at home as a way to stay in touch with friends. Its revenue rose 68% in the first nine months of 2020 versus a year earlier.
Wish, an ecommerce app that sells inexpensive goods from Asia, benefited from an increase in mobile usage and decrease in brickandmortar shopping. Its revenue was up 32% from January through September versus the same period last year. Affirm, founded by PayPal cofounder Max Levchin, offers buynowpaylater financing for consumer purchases. It boosted income by helping people buy Pelotons, the exercise bikes that became a shelterinplace darling. Secondquarter revenue nearly doubled compared with a year earlier.
“The pandemic has accelerated digital transformation across different areas — the way people work, the way people buy things, the way people are dining or doing things we never thought about,” said Bonnie Hyun, head of technology capital markets at the New York Stock Exchange. That’s provided a tailwind to many companies — “and when you’ve got that tailwind, it allowed some companies to evaluate whether this was the right time to pursue a listing and become a public company,” she said.
It’s extraordinary to have so many public offerings in December since the holidays consume time and attention, but nothing about this year is normal. Some of it is pentup demand: After Labor Day is historically a busy IPO season, but many companies postponed going public then because of uncertainty around the election, plus many had postponed earlier in the year when shelterinplace started and the markets were uncertain.
“December is usually a slow month because nobody’s around,” said Drew Bernstein, cochairman of Marcum Bernstein & Pinchuk, which advises Chinese companies that want to go public in the U.S. “But everybody’s around right now. People aren’t going on vacation. Going public in December is a sign of the times.”
Another sign of the times: Road shows, in which preIPO companies meet with investors to pitch their stock, have gone virtual, just like every other business meeting. “Management teams used to have to jet from city to city, but now everything is done over Zoom,” said Jeff Thomas, head of Western U.S. listings for Nasdaq. “Other than Zoom fatigue, it’s more efficient.”
Grizzle’s Willis agreed. “You don’t lose much in translation” from going virtual, he said. “In fact, via Zoom they can see twice as many potential buyers.”
Openingday ceremonies are also largely going virtual.
“At the New York Stock Exchange, we saw this as an opportunity to rethink how we help companies celebrate that moment on their listing day, making it a lot more experiential, interactive and technologyforward,” Hyun said.
While companies can still send a handful of executives to its 11 Wall St. trading floor, it’s also offering webcasts or hybrid events.
Nasdaq created an app so employees of newly public companies could snap selfies with their families that the exchange displays digitally on its sevenstory Times Square tower. A camera takes realtime images as mementos for the employees.
“A lot preferred the virtual experience,” Thomas said. “PreCOVID, there was always a debate about who got to go back to New York. Now everyone’s included — it’s a more inclusive and democratic experience.”