Companies with IPO in 2020: COVID-19 Impact and Market Volatility

The COVID-19 pandemic in 2020 led to widespread economic disruptions, causing initial market volatility with significant declines, followed by a swift recovery. This recovery was spurred by government stimulus packages, low interest rates, and the resilience of the technology and e-commerce sectors. Despite the pandemic, 2020 experienced a surge in IPO activity, particularly in the latter half of the year, fueled by a strong stock market and increased liquidity.

• COVID-19 impact: The onset of the COVID-19 pandemic in early 2020 led to widespread economic disruptions, causing initial market crashes and uncertainty.

• Market volatility: The stock market experienced high levels of volatility, with significant declines in March followed by a swift recovery in the following months. This recovery was fueled by government stimulus packages, low interest rates, and the resilience of certain sectors like technology and e-commerce.

• Surge in IPOs: Despite the pandemic, 2020 saw a surge in IPO activity, especially in the latter half of the year. This was partly due to the strong performance of the stock market, which made public listings more attractive for companies seeking to raise capital.

• Rise of SPACs: Special Purpose Acquisition Companies (SPACs) started to gain prominence in 2020.

The COVID-19 pandemic, which began to significantly impact the global community in early 2020, brought about profound economic disruptions across a wide array of industries, leading to initial market crashes and a pervasive sense of uncertainty. The immediate impact was felt through a series of lockdowns and travel restrictions, aiming to curb the spread of the virus but simultaneously halting much of the world's economic activity. This section expands on the multifaceted economic impacts of the pandemic, reflecting on various sectors, recovery efforts, and long-term changes.

The initial response to the COVID-19 outbreak saw global stock markets experiencing severe volatility. Investors faced tremendous uncertainty, leading to rapid sell-offs in February and March 2020.

However, following these initial declines, the stock market began a surprisingly swift recovery in the subsequent months. Several factors played a crucial role in this rebound. Firstly, governments around the world launched unprecedented stimulus packages, injecting trillions of dollars into their economies. These measures aimed to support businesses and consumers alike, mitigating the economic damage caused by lockdowns and restrictions implemented to control the spread of the virus.

Low interest rates were another key driver of the recovery. Central banks, including the U.S. Federal Reserve, cut interest rates to historic lows. These cuts were intended to encourage borrowing and spending by reducing the cost of credit. This monetary policy measure not only supported businesses in navigating through the economic downturn but also made investing in the stock market more attractive compared to low-yielding bonds or savings accounts.

The resilience of certain sectors, notably technology and e-commerce, also fueled the market's recovery. As the pandemic accelerated digital transformation and shifted consumer habits towards online shopping, companies in these sectors saw substantial growth. Technology firms, in particular, benefited from the increased demand for their products and services, as remote work, online learning, and digital entertainment became more prevalent. E-commerce platforms experienced a surge in usage, as lockdowns and social distancing measures led consumers to shop online more frequently.

This combination of governmental intervention, monetary policy adjustments, and sector-specific resilience not only helped the stock market to recover from its initial pandemic-induced losses but also set the stage for significant growth in the latter part of the year.

The pandemic led to a temporary slowdown in IPO activity during the early part of 2020, as companies and financial markets grappled with uncertainty and volatility. However, as markets stabilized and started shooting upward and as companies adjusted to the pandemic's realities, there was a pent-up demand for IPOs, both from companies seeking to capitalize on market conditions and from investors looking for new opportunities. The environment of low interest rates, designed to mitigate the economic impact of the pandemic, also increased the liquidity in the market, making funds more readily available for investment in IPOs.

The rise of SPACs was one of the most memorable aspects of the IPO market in 2020. SPACs are essentially shell companies formed to raise capital through an IPO with the aim of acquiring an existing company. This process stands in contrast to traditional IPOs, where companies go public to raise funds and offer their shares directly. SPACs, with no commercial operations at their inception, offer an alternative route to the public markets.

Historically, SPACs have been part of the financial landscape for decades but remained relatively under the radar, often associated with smaller market maneuvers. The year 2020, however, saw them emerge as a force to be reckoned with in public equity markets.

The popularity of SPACs during 2020 and the years to follow can be attributed to several factors. One of the most notable of these is that the SPAC route offers a quicker and potentially simpler path to becoming a publicly traded company, which is particularly appealing in times of market volatility, such as those induced by the COVID-19 pandemic. This volatility made traditional IPOs seem riskier and more unpredictable, propelling companies and investors towards SPACs as a more stable alternative.

The IPO of Airbnb was the largest and the most anticipated in 2020. While it had faced (and continued to face) difficulties as so many other companies in the travel industry due to the pandemic, its IPO was well received. The company raised nearly $3.5 billion through its public offering.

Further reading: Brian Chesky: The Pionee of the Shared Economy

As previously mentioned, 2020 saw a flurry of activity in the IPO market. While Airbnb was the largest and most anticipated public offering of the year, the year was full of notable companies conducting IPOs.

The retail investor darling and AI pioneer Palantir went public on September 30th, 2020.

The company behind Rocket Mortgage, Rocket Companies, had its IPO in 2020.

The insurance company Lemonade, Inc. went public in 2020, just five years after its founding.

The cybersecurity company McAfee went public in 2020, but just two years later it was taken private again after being bought out by a private equity firm.

While Airbnb took the spot as the biggest IPO of 2020, DoorDash was right at its heels. The company's IPO raised $3.4 billion when it was conducted in early December.

Snowflake, which offers various cloud-based storage solutions, conducted one of the largest software IPOs ever in 2020.

Further reading: Frank Slootman Beyond Snowflake: One of the Most Respected CEOs

The sports-focused streaming service FuboTV was acquired by FaceBank Group and went public in conjunction with the acquisition.

The Chinese auto manufacturer XPeng, which focuses on EVs, was listed on both the NYSE and the Hong Kong Stock Exchange in 2020.

Unity Technologies, also known as Unity Software, offers a video game software development tool called Unity. They were listed on the NYSE in the summer of 2020.

The IPO year of 2020 is for many remembered for the market volatility and impact of the COVID-19 pandemic. While the pandemic slowed down the IPO market briefly, the swift recovery shown by the markets led to a renewed interest from both investors and companies and the latter half of 2020 saw a flurry of companies going public.