DoorDash, Airbnb to Push IPO ETFs Higher
The U.S. IPO market has been hot this year and new offerings from several high-profile names scheduled this month should boost the space even further.
The largest provider of food delivery services DoorDash is expected to debut on the New York Stock Exchange under the ticker DASH on Dec 9. The company plans to raise $3.1 billion by offering 33 million shares at a price range of $90-$95. At the top end of the range, the food delivery startup has a market capitalization of about $35 billion. The company revised its target price range upward from $75-$85 due to strong interest among institutional investors.
This food delivery company has been benefiting from this year’s stay-in-place orders and social distancing mandates, as customers increasingly turned to digital food delivery services. As such, revenues in the first nine months of 2020 more than tripled over the same period last year to $1.9 billion while net loss narrowed to $149 million from $533 million (read: COVID-19 Cases on the Rise: ETFs to Bet On).
Another big company set to debut on the Nasdaq on Dec 10 is Airbnb under the ticker ABNB. The company is seeking to raise $2.6 billion by offering 51.9 million shares. It plans to increase its price range to $56-$60 apiece from $44-$50 apiece that will push its potential valuation to as much as $42 billion at the top-end of the IPO range. This vacation rental company has been hit hard as the pandemic wiped out travel demand this year. Its revenue dropped 32% year over year to $2.5 billion during the first nine months of the year while net losses more than doubled to $697 million.
Further, many other companies are expected to go public this month. Affirm Holdings has filed to raise $100 million in an IPO of its Class A common stock under the ticker AFRM, according to an S-1 registration statement. Enterprise artificial intelligence company C3.ai Inc. is offering 15.5 million shares at a price range of $31 to $34. The deal would give the company a market cap of over half a billion dollars. The company plans to list under the ticker “AI” on The New York Stock Exchange.
Online video-game company Roblox has also filed for an initial public offering, expected to occur before the end of this month. This mobile company has been capitalizing the pandemic-fueled sales surge and the growing popularity of its platform. Revenues jumped 68% in the first nine months to $588.7 million while net loss widened to 203.2 million compared with $46.3 million a year earlier. The size of the offering was listed at $1 billion in a U.S. Securities and Exchange Commission filing (read: Can Videogame ETFs Continue their Hot Streak?).
Online retailer Wish has also joined the rush of the consumer technology companies seeking to go public before the end of the year by filing for an initial public offering. Mobile e-commerce startup is set to list on the Nasdaq Global Select Market under the symbol WISH. The company’s revenues surged 30% year over year to $1.3 billion in the first nine months while net loss narrowed to $5 million from $1.3 billion in the year-ago period.
How to Tap?
Investing in multiple IPOs at the same time can be a difficult task. So, investors can easily tap the IPO resurgence with the two domestic-focused ETFs discussed below. These funds have been seeing solid upside in recent weeks given the number of planned offerings.
Renaissance IPO ETF IPO
This fund provides exposure to the largest and most-liquid, newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast-entry basis on the fifth day of trading. The fund currently holds 49 stocks in its basket, with each accounting for less than 11.5% exposure. Technology is the top sector accounting for 32% share while healthcare and communication services round off the next two spots. The fund has amassed $488.4 million in its asset base while it trades in a moderate volume of about 253,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 14.3% in a month (read: After a Stellar Q3, What Lies Ahead of IPO ETFs in Q4?).
First Trust US Equity Opportunities ETF FPX
This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs, and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 101 securities in its basket with the largest allocation going to the top firm with nearly 8.4% share each. The other securities hold no more than 5.8% of the assets. The fund has accumulated $1.8 billion in AUM and witnesses volume of about 110,000 shares per day. It charges 58 bps in fees a year and has gained 6.2% in a month.
Considering the number of offerings in the pipeline, investors looking to take advantage of new growth stocks should definitely bank on these two ETFs. The success of the new listings will add fuel to the booming IPO market.
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