The 2021 stock market quietly breaks a record in this specific category

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VSCompanies are poised to raise more money in 2021 through Initial Public Offerings (IPOs) and Special Purpose Acquisition Company Mergers (SPACs) than any other year. There is just a lot of enthusiasm for newly opened businesses, and businesses are taking advantage of it.

In this video by Motley Fool Behind-the-Scenes Pass, recorded October 25Fool contributor Danny Vena browses the IPO and SPAC issues with fellow contributors Travis Hoium and Jon Quast. All three agree that in this market it’s more important than ever to understand the companies in which you invest.

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Danny Vena: With that, let’s just start here. I wanted to start off by sharing just some data that has to do with what’s going on in the IPO space right now. In this case, as of September 19, we had 19 companies so far this year that have raised over $ 1 billion each on the Nasdaq Stock Exchange and the New York Stock Exchange. Now, to put that in context, around the same time last year, we only had 15 companies that had reached that same benchmark.

Now, so far in 2021, and this is only IPOs, does not include PSPCs. IPOs in the United States have raised more than $ 98 billion, up from just under $ 70 billion at the same time last year. Now the record for all of last year was $ 102.5 billion in IPO raised equity, and now that we’re a month away from that, I think we’ve probably already passed. this record. I think it’s another banner year for IPOs.

Last year was a record. This year is a record. Is it crazy what’s going on in the IPO market? If you look back to the end of last year, we had half a dozen companies that over double their stock market price on the day of the IPO. In many cases, these were companies that had already issued their initial range, adjusted the range at which they were going to price the stock, and then ultimately set it above the range.

There is a lot of enthusiasm for stocks and IPOs right now. But that also comes as a caveat, because even more than we’ve seen before, many IPOs climb from day one. But then you get in a couple of weeks or months and they lose half or three quarters of their value, so just something to watch out for.

Does anyone want to comment on this?

Travis Hoium: Yes, sorry, I wanted to add about PSPC because it’s another thing that since the craze for PSPC is still relatively young, I think investors really need to keep an eye on the details of these PSPC companies that become public, and I’ll talk a bit about it with Wynn Interactive [Austerlitz Acquisition Corporation (NYSE: AUS)]. But the details around that $ 10 price, the buy-back rules, what happens after the company completes its SPAC and what the future holds for the company. Because at the end of the day, whether you buy an IPO or a SPAC, you buy the underlying company, and therefore we want to make sure that being strong as investors, this can be both an advantage and a drawback for those of us buying in the public markets. Just something to keep in mind.

Vena: Absolutely correct.

Jon, your thoughts?

Jon Quest: Well, just the stats you shared Danny are really mind-blowing because in many ways 2020 seemed crazier to me, and I know it’s anecdotal, but just how many companies were going public in The ratings they were coming public to, 2020 just felt a lot warmer than 2021 has felt so far. But as the stats you shared prove, it’s actually an even hotter year than last year.

I think the caveat we’re mentioning here is that it’s easy money for business right now in many ways. It brings good companies to the market. It also brings bad business [laughs] in the market because they see the opportunity.

Hoïum: I just want to add to what Jon just said about easy money. I just watched on Crunchbase. This week – and I had to go through it to make sure it was correct – Crunchbase announces that it’s mostly in the private markets, so it captures a lot of VC funding. There have been 601 rounds of funding and $ 20.6 billion in total funding.

There’s money flowing everywhere, whether it’s PSPC or IPOs, or in private markets through venture capital, acquisitions from more established companies, the Tide is rising all boats, whether it is good or not for a given business, the long term may be a bit of a different story.

Vena: I think it’s really interesting that if you go back to the beginning of the year, after the frenzy we saw at the end of last year with the SPACs, when it became known that the SEC was looking into the matter. and that she was going to publish regulations, all of a sudden everyone came back to these PSPC acquisitions for several months.

What really happened was the SEC said, “We’re going to put rules around these warrants that are issued with PSPCs.” Then soon after, everything started up again. It was really interesting to see that ratchet come back so quickly. Then just that hiatus, then it all resumes, and we’re still looking at a banner year for PSPCs as well.

Danny Vena has no position in the stocks mentioned. Jon Quast owns shares of Nasdaq. Travis Hoium has no position in the stocks mentioned. The Motley Fool recommends the Nasdaq. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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