If you’re looking for hot growth stocks, IPOs are a great place to start your search. These freshly minted public companies tend to make a splash in the market with big growth expectations and high price tags to match. Although not every IPO stock will be a winner, some of the most valuable companies in the world such as Amazon (AMZN 6.83%) and Apple (AAPL 0.8%) were once IPOs, or initial public offerings, and have turned early investors into millionaires.
What is an IPO?
IPOs to watch
IPO stocks to watch in 2023
With the stock market trading at all-time highs through much of 2021, the IPO market has remained strong, carrying the momentum from the second half of 2020 when a strong rebound in tech stocks encouraged new offerings. Although investor sentiment may be shifting with interest rates expected to rise, there are still a number of hot IPOs entering the market, and others are anticipated.
IPO
Among the recent IPOs to watch are the following:
1. Robinhood Markets
Robinhood (HOOD -2.2%) was one of the most anticipated IPOs of 2021. The disruptive online brokerage is one of the most talked-about companies in the investing world these days. Robinhood’s no-commission stock trades and easy-to-use mobile interface have brought a flood of new millennial investors into the market and helped fuel the meme stock rallies in GameStop (GME -2.81%) and AMC Entertainment (NASDAQ:AMC), as well as the swell in cryptocurrency prices.
Robinhood also has the numbers to back up the hype. Through the first three quarters of 2021, revenue jumped 126% to $1.45 billion, and funded accounts were up to 22.4 million by the third quarter of 2021, doubling on a year-over-year basis.
After a strong debut, however, the stock has slumped amid questions about its ability to be a major player in cryptocurrency and as some key metrics declined after the Dogecoin (CRYPTO: DOGE) boom in the second quarter of 2021. The company did introduce crypto wallets at the end of 2021, showing that it isn’t ignoring the newest frontier in investing.
While Robinhood’s future is uncertain given the threat of regulation and the controversy surrounding it, it’s a good bet that this disruptive company will continue to change the way we invest.
2. Coinbase
The cryptocurrency boom officially went mainstream in April 2021 with the successful debut of Coinbase (COIN -5.13%), the largest cryptocurrency exchange in the U.S. and the first major crypto business to list on the public markets.
Coinbase chose to go public through a direct listing, which is similar to an IPO but allows a company to skip the process of selling new shares and avoid having to pay underwriters. The stock simply begins trading on an exchange at a predetermined price, allowing current equity holders to sell their shares.
Coinbase's stock price initially surged in its debut, jumping from the $250 “reference price” to almost $430 in its first trading days. In the following weeks, however, the stock's price tumbled, and the stock has been relatively quiet since then.
Expect Coinbase’s value to be closely linked for the foreseeable future to that of the most popular cryptocurrencies such as Bitcoin (BTC -0.6%) and Ethereum (ETH -0.53%), as well as trading activity in crypto.
3. Roblox
Like Coinbase, the online gaming platform Roblox (NASDAQ:RBLX) went public in March 2021 through a direct listing, and the stock gained value in subsequent weeks. Roblox is not a game-maker but the operator of a platform that allows anyone to make a video game.
As of September 2021, Roblox had more than 8 million developers on its site and 47.3 million daily active users. Like other video game companies, Roblox’s growth accelerated during the COVID-19 pandemic as bookings jumped 171% during 2020 compared to a 39% growth rate in 2019.
Management has warned that growth will decelerate as the pandemic fades, but the platform business model has worked well for other companies and should continue to do so for Roblox. The company has a number of competitive advantages, including network effects and structural barriers to entry, which should fuel its long-term growth.
4. Rivian
Electric vehicles have fetched sky-high valuations ever since Tesla (TSLA 0.75%) stock exploded in 2020. Rivian (RIVN -0.99%) became the latest poster child for investor fervor for the sector when it went public in November 2021.
The EV maker’s market cap soared past $150 billion briefly before fading. Rivian had barely any revenue before going public, but the company’s technology has been heavily hyped. It also has agreed to sell 100,000 delivery vans to Amazon and counts both Amazon and Ford (F -12.25%) as major investors.
Rivian is ramping up production of its R1T pickup truck, with plans for 40,000 vehicles this year and a target of 1 million in a decade. The electric truck has received rave reviews and could put the stock on a Tesla-like trajectory if Rivian can build a similar devoted fan base.
Upcoming IPOs
Upcoming IPOs: Companies going public in 2023
Here are some other big-name companies with plans to go public in 2023. Note, however, that given market conditions in mid-2022, companies may delay planned IPOs and await a more favorable economy before going public.
1. Instacart
The leader in online grocery delivery is also on the verge of going public in 2022. A public stock offering has been on the horizon since CEO Apoorva Mehta declared the company’s intentions in September 2019, although the company said in November it was pausing plans to go public to diversify its business. Still, an IPO is likely to come at some point in the future, possibly this year, since the company filed with the SEC on May 11, 2022.
Instacart was a big winner during the pandemic with its grocery delivery service benefiting from a surge in demand. The company raised $265 million at a $39 billion valuation in March 2021, making it likely that an Instacart IPO would be one of the biggest debuts of the year.
2. Stripe
As the most valuable privately held tech start-up in the U.S., digital payments company Stripe may be the most anticipated IPO out there. While the company has not announced plans to go public, Reuters reported that Stripe had taken its first step toward a market debut, tapping a law firm to guide it through the process. The wire service also said the company was planning on a direct listing instead of a traditional IPO since it doesn’t need to raise new funds.
Stripe, which provides cloud software that allows businesses to seamlessly process payments, was valued at $95 billion in its latest funding round in March 2021. Given that rich valuation, it’s not surprising that a listing would be imminent, since early investors and insiders need the company to go public to cash out their holdings.
Related investing topics
3. Reddit
Social media company Reddit attracted a lot of attention during the pandemic as the subreddit group WallStreetBets helped drive a surge in meme stocks like GameStop and AMC Entertainment. Social distancing protocols also helped fuel interest in the discussion board-based site.
Now, Reddit is looking to parlay that tailwind into a public offering. The company filed confidentially to go public in December 2021 and is benefiting from strong user growth. In October 2020, daily active users were up 44% from the previous year to 52 million, and the percentage of people in the U.S. who use Reddit rose from 11% in 2019 to 18% in 2021.
Reddit’s IPO almost certainly won’t be the biggest of the year; the company was valued at $10 billion in its latest funding round. Even so, it is one of the more unique companies set to go public this year. Given the success of other social media stocks, the company is likely to attract considerable attention.
