There is also the small matter of the US presidential election to take on board. You get some idea of how institutional sentiment is playing out through a recent client poll conducted by Nomura (TYO: 8604), which suggested that the worst-case scenario for the S&P 500 would be if there was to be no clear winner on election night, whereas the most favourable index reaction would occur if Donald Trump was re-elected and the US Senate remained in Republican hands. You would imagine, however, that indices could also come under pressure if a newly mandated Trump administration took aim at the heavily weighted tech companies over their immunity from civil liabilities under section 230 of the Communications Decency Act, in addition to the antitrust measures already in train. Any such move could conceivably attract a degree of bipartisan support in the US Congress.
The plain fact that the S&P 500 is still bubbling around all-time highs provides a clear incentive to file for an IPO, while market valuations in the US regularly exceed pre-listing estimates. It seems that investors have become more willing to bid-up the value of newly listed companies in expectation of future growth, particularly where market-disrupting tech stocks are concerned. But there is a chance that some big-name listing prospects could find themselves left in the blocks when the market runs out of steam.
That could even apply to Airbnb, though there are rumblings that the online rental accommodation platform could go public as early as December. Prior to the pandemic, it was estimated that the group could be worth upwards of $40bn, but the subsequent collapse in international travel volumes struck at the heart of the business model. Consequently, we are now seeing a wide variation in prospective valuations for the IPO, with the group’s private equity interests doubtless pushing for the top-tier estimates. With the global tourism industry in crisis, it may be an opportune moment to buy into Airbnb’s long-term growth prospects if you envision that travel volumes could return to pre-pandemic levels in reasonably short order, though industry projections remain downbeat. At any rate, UK investors must wait until the shares commence trading before they can start bidding anyway.
Unicorns are not confined to Silicon Valley. China’s Ant Group has confirmed that it will raise $34.5bn through a dual IPO (Shanghai and Hong Kong), with the set price implying a value of $313bn for the fintech giant. roughly 50 per cent in advance of what you would have to outlay to buy Cisco Systems (NASDAQ: CSCO). The public offer will be the largest in history, overtaking last December’s debut for Saudi Aramco (TADAWUL: 2222), but with 80 per cent of the company’s Shanghai-issued shares earmarked for strategic investors, you will probably have to rely on indirect exposure.
You might have better luck closer to home if Deliveroo goes through with plans to go public in the early part of 2021. It has been reported that Goldman Sachs is to oversee Deliveroo’s London flotation. No formal timetable has been released, though you imagine that Will Shu, the company’s chief executive and co-founder, would prefer to come to the market sooner rather than later.
Fundraising is always preferable when you are riding high and the UK-based food delivery service has been expanding revenues and customer numbers on the back of the pandemic and the various lockdowns which have been put in place. One of Deliveroo’s chief rivals Just Eat Takeaway.com (JET) recently revealed that Q3 order growth accelerated by 46 per cent, mirroring the growth in the company’s share price over the past 12 months.
However, investors should always be wary of gaining exposure at the high-water mark. People must be champing at the bit to get out and about, and there is growing competition in the “aggregation and delivery” sub-sector. Also, news of any successful vaccine trial would automatically undermine the investment case for the business, which managed to keep afloat at the height of the pandemic due to a cash injection from Amazon (NASDAQ: AMZN).
