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IPO market is at all-time highs as 900+ companies have gone public in 2021, $300 billion raised

In this article:
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Yahoo Finance's Emily McCormick breaks down the red-hot Initital Public Offering (IPO) market.

Video transcript

SEANA SMITH: It's been a record setting year for the IPO market. The numbers are just staggering when you take a look at the number of companies that have gone public this year. Investors, they can't seem to get enough of them. So let's bring in Emily McCormick because she has covered many of these public debuts for us this year. And Emily, when you take a look at the excitement from investors, also the momentum that we're seeing in the market, it doesn't look like there's going to be anything that stops this momentum anytime soon.

EMILY MCCORMICK: Well, that's right, Seana. This year has really seen a red hot IPO market. IPOs have already broken a record this year. And just to get those numbers specifically, we've seen more than 900 companies go public so far in 2021. And they've raised nearly $300 billion. And that's according to Dealogic data cited by the Wall Street Journal. And in the third quarter alone, we should point out that there were 175 IPOs and 60 SPAC mergers. That compares to 176 IPOs and 46 SPAC mergers in the second quarter. And that data point is according to FactSet.

But just to recap a few of the names that have gone public via IPO this year, we really have seen an influx of consumer-facing household names from Robinhood back in July, Oatly back in May, to Affirm back in January. And of course, it hasn't just been IPOs that have been popular during this year. We've also seen a number of companies opt to go public via a direct listing, where they sell shares directly to the public, as opposed to issuing new shares. So, just a few examples of that [INAUDIBLE] including [INAUDIBLE] Coinbase and Warby Parker opting for going public via the direct listing method. And then, of course, we have seen the rise of the SPAC merger.

Now we saw that slow down a little bit in the second half of the year compared to what we saw in the early months. But we still have seen a number of really high profile companies opting for SPAC mergers as well from ChargePoint Holdings to Hims & Hers Health and SoFi Technologies. So we also do want to point out that we have seen some of the largest IPOs on record taking place in 2021. And a lot of these have been companies that have either little or no meaningful revenue.

And of course, I'm thinking of Rivian, the Amazon and Ford-backed electric vehicle maker that has been one of those notable examples just in the past couple of weeks alone. That had been the sixth largest IPO ever to take place on a US exchange just earlier this month after raising nearly $12 billion in that public offering. So, guys, all of this data really just goes to show how hot this IPO market has been so far this year. Really a lot of demand among investors, both on the institutional side and on the retail side, for these newly public companies. And as you mentioned, it doesn't show really any signs of slowing down anytime soon. Guys.

KARINA MITCHELL: Yeah, Emily, my head is still spinning over that Rivian IPO. I couldn't believe it. But I want to ask you, what sort of market factors are contributing to this surge?

EMILY MCCORMICK: Well, Karina, I think there really is one big factor that many market pundits have been pointing to specifically as contributing to the rise in IPOs, and of course, other public offerings here. And that's really been because of the friendly market environment created by stimulus from both the Federal Reserve and Congress, especially earlier on during the pandemic. Now, that extraordinary stimulus has really helped booming markets overall and offered the kind of liquidity and easy money that made listings much more appealing for these companies.

Now, the second part of that, of course, is also the fact that the Fed's policies included cutting interest rates to near zero levels. This really created a phenomenon where there's been nowhere else for investors to turn if they've been seeking yield. And because of that, we've seen this incredible rise in growth stocks, and of course, these newly public, often technology-facing, names that have been coming to market recently fall into that category.

That's created just this extraordinary level of demand for these newly public shares and something that's really contributed to the rise that we've seen over the course of 2021 and, of course, even in the years prior, when we think about Uber and Lyft going public back in 2019, when they'd been unprofitable companies at that point as well. Really a phenomenon that has been continuing over the past couple of years and has only accelerated in the past year to date alone. Guys.

SEANA SMITH: All right, Emily McCormick, thanks so much. Let's take a look--

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