The IPO market has been red-hot lately—with some of the most compelling deals still to come, Renaissance Capital Chairman Kathleen Smith said on a call with Barron’s readers Thursday. Renaissance Capital, an IPO investment advisory firm, tracks…
After the stock market’s initial drop at the start of the coronavirus crisis, the shares of companies that had recently gone public, such as Zoom Video Communications (ZM), Slack (WORK) and CrowdStrike Holdings (CRWD), began to take off, Smith said. “They were stocks that were about the new economy and about health and wellness, in the case of Moderna’s vaccine for Covid,” she said. “The money was coming into stocks that tend to be the bread and butter of the IPO market.”
The strong performance of these and other recently public companies heightened investor interest in businesses on the verge of going public, she said, leading to a robust August during which $8 billion was raised in conventional IPOs, with more likely to come. “Depending on how things go, we could have our best year of capital raising since 2014,” said Smith.
Of the companies preparing to go public, Smith called Ant Group’s expected offering the most compelling. The Chinese fintech company founded by former Alibaba Group Holding (BABA) Executive Chairman Jack Ma could be the biggest IPO ever when it duel-lists on the Hong Kong and Shanghai exchanges. “The profile of this company is really strong,” said Smith, citing the company’s one billion active users and 30% profit margins. “All the payment processors have done so well in the market and this is going to be the leading one.”
Smith said she also has her eye on GoodRX, a California-based startup that aggregates drug-pricing data and offers coupons. It could be a $750 million deal when it goes public. And, she’s watching JFrog, a high-growth software-release management company. JFrog “won’t be such a big deal but it’s growing very fast and [is] highly profitable,” she said.
IPO interest is also swirling around Palantir, Smith said. The data-analytics company co-founded by PayPal (PYPL) founder Peter Thiel is expected to go public in September. It will do so through a direct listing—a method of going public that Smith says tends to lead to overpriced stocks. Spotify Technology (SPOT) and…
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