US IPO Boom Sees About $159 Billion Raised in 2020

According to the Financial Times (FT), businesses through the United States Initial Public Offering (IPO) boom this year has been estimated to raise as much as $159 billion dollars. As reported by Benzinga, and per Refinitiv, the global estimated figure businesses raised through IPO’s was estimated at $300 billion with the FT noting that $159 billion of that figure came from US IPOs.

The year 2020 can be described by many as a tumultuous year but the impressive records from some key market markers such as IPOs can significantly change this perception. Despite the COVID-19 pandemic stirring encompassing business shutdowns, with many more startups unable to meet their financial obligations owing to low patronage, a significant number of startups went on to shock the world in IPO listings, indicating growth.

The business models of companies such as Airbnb Inc (NASDAQ: ABNB) and DoorDash Inc (NYSE: DASH) that went public were suited to benefit from the pandemic and subsequent public listing due to the growth potential. While these two firms focused on short-stay rental services and food delivery business respectively represented just a handful of businesses that rode on this year’s IPO Boom, both according to Benzinga has had their shares doubled upon listing.

Besides the IPO boom, the US equities market also recorded a significant growth this year amid a tech rally that helped businesses transition to a work from home model amid the pandemic. David Ludwig, head of equity capital markets in the Americas at Goldman Sachs, told FT that a shift in consumer behavior attracted investors to IPOs. He added that demand was strong for flotations of technology, healthcare, and consumer groups.

While IPOs improved the public listing revenues, Special Purpose Acquisition Companies (SPACs) also saw an increased embrace in the US within the year. Revenues from SPACs going public were pegged at $81 billion with a record 248 SPACs going public this year.

Tech, Healthcare and Consumer Firms the Biggest Gainers in the IPO Boom

The IPO boom did not favor every company in every industry, especially those companies whose business models are unable to swiftly adjust to the changing technological demands the COVID-19 pandemic ushered in. However, companies in the technology sector alongside healthcare and consumer firms benefitted from the IPO boom according to David Ludwig, head of equity capital markets in the Americas at Goldman Sachs.

“Companies benefiting from the shifts that occurred saw incredible receptivity from a broad set of investors,” he said noting that demand was particularly strong for the flotations of technology, healthcare, and consumer groups.

He also posited that consumers are now awakened to the prospects of getting served at the comfort of their homes and that many may just continue ordering for home deliveries even after the pandemic must have been over.

The record of IPO and SPACs showed how resilient the US market is and the prospect it brings in the coming year.