One of the most crucial and important moves a company may ever take in its lifespan is an initial public offering (IPO). It not only symbolizes a stage of development, but it also offers investors the possibility to acquire a stake in it. After all, completing the IPO procedure entails making the business public and allowing it to trade on a stock exchange such as Nasdaq or US Stock Exchange. Some IPOs have greater impact than others. The company's standing (i.e., how well-known it is) and how effectively the IPO marketing is done are two elements that affect the hype. But it's also crucial that the business has a distinctive business plan, a successful track record, and a market with room to develop.
What would make an IPO more likely to be successful?
A company going public might entice investors with a variety of strategies. In general, a business that experiences faster growth than the sector average will draw capital from investors. The following factors can increase the likelihood that the IPO will succeed:
- An exclusively different business model.
- A product or service which has a competitive edge or a first mover advantage.
- A growing market that can be targeted.
- Cashflow generation and strong profit margins.
- Strong top-line revenue growth and anticipated revenue growth that is considerable and sustainable.
Some Successful IPOs Globally
Many companies have had successful IPOs over the years. You might have heard the names of big companies like Alibaba which had a successful IPO. We will have a look at some of the recent IPOs which ticked all the boxes of being successful putting the company on the right track.
Doximity, a company that offers a digital platform for doctors that is cloud-based, had the finest IPO from 2021. The stock, which has been up by 99 percent at a time, has never fallen below its $26 IPO price. According to FactSet, the company's overall return from its listing price, plus dividends, is 102%. Revenue for the third quarter was up 67 percent year over year, according to the business.
Without even launching its product on the mass market, Rivian was among the biggest IPOs of 2021. The IPO was conducted on November 10, 2021. With a valuation of $66.5 billion, the electric vehicle manufacturer raised the most money, about $11.9 billion of all the venture capital-backed firms, that went public in 2021 in its November IPO. Amazon being a significant investor probably helped and they also pre-ordered a sizable fleet of cars from the business, ensuring a healthy sales funnel.
Ryan Specialty Groups
Ryan Specialty Group is listed on the New York Stock Exchange under the symbol "RYAN". The company raised $1.538 billion in its initial public offering of 65,456,020 shares. Davis Polk was the joint lead book-running manager for the offering. Ryan has continued to trade above the IPO price of $23.50. According to FactSet, Ryan's overall return on its offer price is 67 percent. Ryan said earlier in March that fourth-quarter revenue increased by nearly 16 percent from the previous year to $378.5 million.
This Saudi Arabian corporation, which is ranked fifth on Forbes' Global 2000 list for 2021, is one of the biggest businesses in the world. On December 5, 2019, the business became public and started trading on the Saudi Stock Exchange. It initially sold 3 billion shares to raise $25.6 billion. After the corporation apparently sold a further 450 million shares, that initial amount was increased to $29.4 billion. It overtook Alibaba to claim the title of largest IPO in history, surpassing it.
A lot of EV startups went public in 2021, especially through special-purpose acquisition companies. Since SPACs permit firms going public to use future projections in their marketing and many EV companies are pre-revenue, they were popular this year and many EV companies chose to use them to seek capital. This includes Lucid Motors, which has no vehicles for sale but nevertheless received $4.6 billion through its first public offering (IPO). At the time of its initial public offering, i.e., on July 25, 202,1 the firm was valued at $24 billion, indicating that investors believe Lucid will have a great chance to dominate the EV market once it starts producing some vehicles.
For this IPO, let's look a little further back to 2008. Processing debit and credit cards is Visa's area of expertise. The company's public market debut during the world financial crisis may seem odd. And it's incredible that it was able to raise about $17.4 billion. Since each share was valued at $44, the business sold 406 million shares overall. Given that it doesn't really lend money to customers, Visa is less vulnerable to default and late payments than other financial services firms, which is perhaps one of the reasons it has been successful. Fees for processing payments are how it generates revenue.
Grab, a ride-hailing and delivery service founded in Singapore, made one of the largest public debuts of the year toward the end of 2021, raising $4.5 billion through its SPAC merger. According to CNBC, the $40 billion company merged with Altimeter Growth Corp. to become the largest company to complete a SPAC merger. Companies like Experian Ventures and Emtek Group fund Grab.
Roblox is a hugely well-liked online gaming and communication platform that was established in 2004 by Canadian American businessman David Baszucki, who goes by the name of "builderman" on the digital world. The San Mateo, California-based company, which has more than 164 million active monthly users, had its eagerly-awaited public debut on March 10, 2021, and its stock rose as kids and families continued to amuse themselves and connect via the Roblox platform. The company's IPO valuation was $30 billion.
The pinnacle of finance is reached with initial public offerings. Investors compete for shares when a well-known, formerly private company goes public. They are already familiar with the company's management, earning history, and expectations. The only thing left to chance in many instances is how high the share price will rise once trading starts. IPOs are thus great for investors who believe in a company's stature.
Download "The IPO Guide For 2022" Here.