December’s dazzling array of fresh public companies about to hit the markets indicates how strong the tech markets really are.
Many tech firms have returned over 100% year to date.
Aside from the U.S. housing market, tech is the only industry that has strengthened in 2020; and imagine if the economy is rejuvenated by a vaccine, then 2021 could be a year to remember.
Headlining the various tech start-ups coming to market are food delivery app DoorDash Inc. and accommodation platform Airbnb Inc. ready to start trading this week in long-awaited listings.
Not only are they going public, but they also raised their price range with Airbnb valued at as much as $42 billion at the top end of the revised range.
This indicates a healthy appetite to absorb these new shares.
The price target range will be between $56-$60 and at that price, these shares are a no-brainer buy and hold for the long term.
The boosted price targets put both tech companies among the five biggest U.S. IPOs of 2020.
The two companies are hoping to raise a combined $6.2 billion at the top of their price ranges.
IPOs on U.S. exchanges have already raised a record $156 billion this year and much of that is connected to all-time low interest rates which makes sense for corporates to go on a debt binge.
Broader sentiment is starting to really turn with many investors coming back from the sidelines after the market chaos in the early days of the pandemic - and the hoopla over the final outcome of the U.S. election.
Now the uptick in demand is meeting the issuance of shares from Airbnb and DoorDash and this could quickly spiral into a huge surge in shares from these two well-known brands.
That’s not the only action coming to town.
Affirm Holdings Inc., which allows online shoppers to pay for purchases such as Peloton bikes in installments and online video-game company Roblox Corp are next.
It’s highly probable that they score valuations over tens of billions of dollars.
ContextLogic Inc., the parent of online retailer Wish, launched its share sale on Monday. It’s aiming to raise as much as $1.1 billion at a fully diluted valuation of $17 billion.
Airbnb is aiming to be valued at as much as $42 billion in its IPO, while DoorDash could hit a valuation of about $35 billion.
This valuation is more than double DoorDash's private valuation it surpassed in a summer 2020 fundraising round.
The company has been the beneficiary of the insatiable demand for meals delivered to shelter-at-home customers.
Airbnb had been valued at $18 billion after tapping the debt markets in early spring at the height of pandemic delirium.
The company was damaged by the downturn in travel spending and border bans but has recently seen a spike in customers seeking longer-term, domestic rentals.
Airbnb’s IPO is also seen as management’s way to cash out many long-term employees that have stipulations in their contracts that Airbnb must go public by 2021 to profit off their vested shares.
This has been a year to remember for tech IPOs and we are steamrolling into 2021 with a hot debt market and tech unstoppable.
Examples are plentiful such as Enterprise software Snowflake Inc., which has soared more than 200% since its listing to a $110 billion public market valuation.
December’s cohort of soon-to-be public entities - all based in the San Francisco Bay Area – lean towards consumers stuck at home with extra time and cash on their hands.
If the virus can trend downwards as the weather turns hotter in the spring, which is the most likely scenario, that could set a stage for a major reversal in the U.S. economy and tech will be one of the major recipients.
At this point, tech is holding the rest of the market up as energy, retail, transport has tanked.
Even precious metals have been replaced by the digital gold bitcoin in the safe haven trade.
Airbnb is definitely the best of the group and a solid buy on the dip candidate.
The 30% drop in revenue year to date won’t last forever and as they start to mature and rebuild their business as international borders slowly start to open again - this is a strong buy.
