the year of IPOs

have you noticed the headlines recently? they’re all about IPOs. Most interesting technology companies you know (or use) are trying to list in the public market. It is not just the business press that seems to be transfixed by these IPO announcements. it’s everyone. 

on social media, if you’re following some funny folks, you’ve seen the word, “stonks” doing the rounds. there’s a reason. twenty two companies in India have already done their IPOs between January and March this year.

there are so many more to come. one of the most anticipated ones is probably Zomato, which has also filed the paperwork signaling its intention to go public. other companies such as Delhivery, Paytm, and Nykaa are also preparing to list. which means you can soon not only use these apps but also own them.

it’s not just India. in the US too, nearly 500 companies went public between January and May '21. it was impossible to miss Coinbase’s successful listing on Nasdaq. South Korean company Coupang surged by 40% on its launch. even Freshworks, one of India’s largest SaaS companies, is headed to the US to launch an IPO. 

why this sudden rush?

an IPO is not just about raising money. the companies going public are not short on capital. some of them have, conservatively, raised close to $1 billion in capital from venture funds. going public rather means that a company is prepared and mature enough for public scrutiny. staying out of the public eye gives companies an opportunity to experiment, make mistakes, learn, and iterate fast. an IPO opens up every decision for discussion. public markets are unforgiving. they play judge, jury, executioner to each decision. an IPO is often a coming of age for a company.

where's the cash coming from?

liquidity. stimulus packages across the world have helped make capital easily accessible. India cut corporation tax too, boosting liquidity for companies. this started a bull run, the BSE Sensex rising 51% since June 8, 2020. corporate profits as a share of GDP hit a 10-year high in FY 2021.

meanwhile, in the US, the $1.9 trillion relief bill gave a $1,400 cheque to every American in need. with lockdowns limiting spending avenues, a lot of that cash is finding its way to stock markets.

companies adapted to the lockdown by fine-tuning their business models to the changing needs and recalibrating their long-term strategies. Zomato, for example, now levies a delivery fee on every order and has managed to raise its average order value. this puts it on track to profitability. and that’s a word everyone loves, “profit”.