Busy IPO market is on track to make 2021 the hottest year ever

With Wall Street’s thirst for stock market debuts showing no signs of slowing down and plenty of big deals yet to come, 2021 is on track to set a new record for IPOs.

The year kicked off with a bang as standouts such as video game platform Roblox — with a $40 billion valuation — hit the IPO market in March, followed by a spate of other high-profile, multibillion-dollar offerings. 

These included Coinbase, which came in at a $65 billion valuation in April, and electric vehicle automaker Rivian, which made its blockbuster debut in November with a valuation of over $100 billion. 

The great IPO boom of 2021

With about six weeks left in 2021, the value of companies that went public this year has already reached $1 trillion, double the figure for 2020, according to Pitchbook data. But the year is winding down with still more IPO candidates with massive valuations squarely on investors’ radar.

At the time of publication, Pitchbook finds, some 981 U.S. companies had gone IPO this year. And roughly 17% of 2021’s total exit value so far, or about $166.9 billion, came through companies that merged with SPACs.

To put these figures into context, in the first three quarters of the year alone, there were already more IPOS than in 1996, at the height of the dot-com boom, according to TheStreet. The previous record year for IPOs was 406 in the internet bubble year of 2000 with companies raising roughly $93 billion in proceeds.

What’s driving the IPO rush? 

Analysts say the current IPO mania is being driven by sky-high corporate valuations in the U.S. stock market, inflated by the Federal Reserve’s low-interest rates and pandemic stimulus relief funds. And it’s benefitting not just traditional companies going public but also SPACs, pushing the IPO numbers higher.

High levels of venture capital

According to the National Venture Capital Association, some $221 billion in available U.S. venture capital funds is also contributing to the IPO market frenzy.

VC fundraising activity for 2021 has already shattered last year’s record, notching $96 billion to date. At its current pace, VC fundraising activity will easily break the $100 billion mark in new capital in 2021. 

In addition, the NVCA Association estimates that private equity firms, hedge funds and various other nontraditional investment firms globally have as much as $350 billion available to invest. This strong pipeline of venture capital and the swiftness with which nontraditional investors can make investments will continue to push yearly deal values higher.

SPACs down, but not out

SPACs got renewed attention and became a craze after COVID-19 shut down the IPO market in early 2020. These SPAC startups are also currently fanning the IPO blitz.

Typically, about 15 SPACs go public each quarter. But that number soared to 82 in the third quarter of 2020 and to 129 in the fourth quarter. Then it zoomed to a record high of 298 in the first quarter of 2021. The number of SPACs dipped to 64 in the second quarter, and then rebounded to 79 in the third. 

FactSet Research in late October said 294 companies had plans to go public, though possibly not all will launch this year — but that a majority of them are SPACs.

Upcoming high-profile IPO stocks

Coming up on the IPO agenda is rumored to be San Francisco-based mobile payment company Stripe, most recently valued at $95 billion but whose founders state they are happy to keep the firm private. Another big name said to be in the IPO pipeline is Instacart, America’s leading online grocery delivery platform, which would be one of the biggest IPOs of 2021.