By Shane Weston
June 30th, 2021
The initial public offering (IPO) market had a stellar performance last year and it's only been performing better this year. CNBC’s Mad Money talk show host, Jim Cramer stated regarding its performance, “we haven’t seen anything like this in ages.” Companies such as Bumble (NASDAQ: BMBL), Didi (NYSE: DIDI), Coinbase (NASDAQ: COIN), and Roblox (NYSE: RBLX) have kicked off their public market debuts to take advantage of this booming market. Meanwhile, Robinhood, Instacart, and many others will become public later this year.
As the second quarter ended last week, the IPO market closed on a record-breaking performance. IPOs are performing at one of the highest levels in the past 20 years. There has been a total of 216 companies with an outstanding $79.9 billion raised. In fact, 16 of the IPO companies have raised a billion dollars or more, while two other companies are on the verge of making the total 18. Didi Chuxing and Coupang (NYSE: CPNG) have led the way this year, raising $4.4 billion and $4.6 billion.

Companies have been eager to complete their security exchange commission (SEC) filings in order to become listed on the public market. The sky-rocketed valuations have made it highly attractive as the market continues to climb. Analysts claim the booming IPO market has been primarily caused by the Federal Reserve’s low-interest rates and stimulus packages that many citizens have received throughout the pandemic.
The emergence of special purpose acquisition companies (SPACs) has also helped increase the number of IPOs through the non-traditional route to the public market. SPACs can be defined as, “companies that are formed to raise money through an IPO to buy another company". SPACs are also known as blank check companies. There have been 353 SPAC initial public offerings this year, but the second quarter saw a sharp decline in SPACs due to the regulatory pressure by the SEC. Analysts have predicted to see this popular route decline over the next couple of quarters and into the future.
While SPACs have seemed to cool off, the returns of the traditional IPOs have been very positive. The average first-day gain has been 40% and the average one-week return gain is at 35%. The two percentages eclipse both of the last two-year averages by a wide margin. But overall, the 2021 IPO median average return has been 8%.
There is uncertainty for the long-term future of this hot trend, but it’s expected to see the traditional IPOs finish the year on a high note.
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