What Does the Surge of IPOs Mean for Private Businesses?

Right now, there are more IPOs expected this year than there were during the Dot Com Bubble.

Here are the numbers, according to a report from Renaissance Capital:

●????? 90-110 companies have filed to go public over the next 4 months.

●????? 2021 is on track for 375 total IPOs that will raise about $125 billion.

●????? 310 SPACs are expected to close deals over the next 4 months to the tune of about $70 billion.

●????? 415 SPACs have already raised $109 billion so far in 2021.

Here are just a few of the high-profile companies that have already filed to go public:

1.???? Warby Parker (prescription eyeglases)

2.???? Fresh Market (fresh food grocer)

3.???? Authentic Brands (brand licenser--Nautica, Eddie Bauer)

4.???? Allbirds (sustainable footwear)

5.???? Fabletics (workout-apparel brand backed by Kate Hudson)

Here are a few brands that have a strong chance of filing:

1.???? Instacart (grocery delivery)

2.???? Chobani (Greek yogurt)

3.???? Sweetgreen (fast-casual salad restaurants)

4.???? Flipkart (India’s largest online retailer, a Walmart spinout)

5.???? Impossible Foods (plant-based meat products)

6.???? Toast (Cloud-based restaurant software company)

7.???? Stripe (Payment processing Saas company)

8.???? Rivian Automotive (EV company backed by Amazon and Ford)

So what does this mean for businesses that are still private and contemplating an IPO?

1.???? You’ll need to separate yourself from the others - A surge of IPOs means that there is plenty of capital available. However, it also means that it’ll be harder to separate your stock from the pack.

2.???? It might be harder to raise capital - Despite what appears to be a healthy appetite for new issues, an inability to separate your offering could result in less access to capital than expected

3.???? You’ll need to appeal to both retail/institutional - More than ever before, companies need to win the hearts of both institutional and retail investors.

Additionally, although SPACs have been an incredibly popular alternative for going public, they might not be the best option moving forward. An IPO data analyst for Rennaissance, Lily McGonagle, stated:

“SPACs are expected to have a harder time raising IPO capital due to a broad-based decline in SPAC returns and greater regulatory scrutiny from the SEC.”

Due to this, many companies have also been using a reverse take-over (RTO) strategy as an option for going public. A reverse take-over is when a private company buys a majority stake in a public company that has basically zero assets. By doing this, the private company essentially becomes public. This strategy is especially common in the tech, ESG, and cannabis sectors.

Regardless of whether it’s an IPO, SPAC, or RTO, what’s most important is implementing the strategy that will work best for your company.

If you plan on going public in the near future, need access to capital, or are developing a communication strategy to reach the right investors, Sophic Capital can help you develop the right strategy to navigate these waters and reach your goals.?