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IPOs generally make more news than other investment options. Will the company list at premium, will it be oversubscribed? Will the scrip rise exponentially in a short span of time? These are some questions that retail investors seek answer to. Let’s study the outcomes of some of the biggest IPOs of 2020 and 2021 in brief.
How was 2020 for IPOs?
Here’s what numbers suggest.
According to market research firm, CPE Media, total of 43 IPOs saw dawn on Canadian stock exchanges in 2020, and when we add SPACs (Special Purpose Acquisition Corporations) and CPCs (Capital Pool Companies) to this, the figure is as high as 77. Corporations in mining business led the IPO bandwagon as nearly half of all IPOs came from this segment.
In terms of listing on exchanges (taking into account only non-CPC and NON-SPAC IPOs), the Canadian Stock Exchange (CSE) saw the highest number of IPO listings, followed by the Toronto Stock Exchange (TSX).
In terms of money raised, the waste management company, GFL Environmental Inc. (TSX:GFL), was by far the biggest raiser with US$ 1,425 million. Other IPOs that made noise were the electronic payment processing firm, Nuvei Corporation (TSX:NVEI), raising US$ 805 million; the biotech firm, AbCellera Biologics Inc., raising US$ 555 million; and the precision oncology firm, Repare Therapeutics Inc. (raising US$ 253 million). In aggregate, 2020 was the best year in terms of money raised since 2014.
How have IPOs fared in terms of return on investment?
GFL Environmental Inc. (TSX:GFL) traded below C$ 25.00 on TSX until May ’20. However, the scrip traded at C$ 42.37 when market closed on April 14, 2021. That’s almost 75 percent return on investment in less than a year.
Nuvei Corporation (TSX:NVEI) traded below C$ 50.00 on TSX until Sept ’20. However, the scrip traded at C$ 85.64 when market closed on April 14, 2021. Now that’s almost 70 percent return on investment in 7 months.
When you compare these figures with other traditional saving and investment instruments, the difference is indeed striking and substantial.
What does 2021 hold for IPOs?
Let’s talk numbers here again.
In March 2021, the fintech firm, Payfare (TSX:PAY) IPO listed on TSX, and it has since given good return on investment. More than 30 companies are likely to bring out IPO in 2021.
Will IPOs make you wealthier?
Chances are quite high. The bad element in this entire IPO story is that some listings do fail to increase investors’ wealth. For example, Hydrogen fuel cells tech firm, Loop Energy Inc. (TSX:LPEN), fell more than 12 percent since its listing on TSX in Feb ’21. The lack of interest in this scrip can be attributed to lower-than-expected adoption of hydrogen fuel technology.
Much depends on future prospects of the sector in which the company operates. Pandemic has also added some new elements, for example, pharma and healthcare IPOs, if any, can be good bet in comparison to aviation and industrial stocks.
The above constitutes a preliminary view and any interest in stocks or IPOs should be evaluated further from an investment point of view.
