This article was originally published on Opto – Invest in the Next Big Idea.
The current atmosphere has seen huge jumps in opening share prices, toppy valuations and terms like SPAC (special purchase acquisition company) becoming part of the lexicon for trading in 2021.
According to Barron’s, IPOs have raised $102bn so far in 2021, with 80% of them being SPACs (to 10 March’s close). The IPO investment theme was up 7.09% in the past week, according to our thematic ETF screener. With Deliveroo aiming to raise a cool £1bn in its upcoming London listing, it doesn’t look like things are going to slow down any time soon.
With this in mind, we take a look at Coupang, Roblox and ESM Acquisition’s debuts and ask what the opportunity is for investors.
South Korean online retailer Coupang’s IPO was spectacular. Shares were initially priced at $35. The stock closed Thursday’s trading at $50, with a $90bn market cap. As of 17 March’s close, however, Coupang’s share price is down circa 12.1% following its debut, underscoring the volatile nature of these big-ticket IPOs.
Coupang’s IPO was the biggest US IPO by a foreign company since Alibaba’s [BABA] debut in 2014. Coupang is already the second-biggest South Korean public company, behind Samsung . Writing on Barron’s, Eric J. Savitz describes the company as like Amazon [AMZN] “but maybe even better”, incorporating services similar to DoorDash [DASH] and Netflix [NFLX].
Coupang’s sales came in at $12bn in 2020, up 91% compared to the previous year as the pandemic turbocharged the shift to online shopping. Softbank [9984.T] is the company’s biggest investor, having first backed Coupang in 2015. Softbank’s total investment as part of its Vision Fund is $2.7bn, with the stake now worth over $30bn, as reported by Barron’s.
Lydia Jett, a Vision Fund executive who sits on the Coupang board, says Softbank has no intention of selling its stake.
“We’re set up to hold Coupang for the long term. There is a lot of room left in what is a $500 billion retail market,” Jett was reported as saying.
Roblox’s share price has soared 10.49% to $76.79 since the videogame platform listed this week (as of 17 March’s close). This places it well above the $29.5bn valuation it received during private fundraising two months ago, the Wall Street Journalreports.
If you haven’t heard of Roblox, you’re clearly not a US kid aged between 9 and 12 — a huge 75% of whom use the service. Launched in 2006, Roblox hosts user-created video games, and lets people play and chat with friends. While the platform is losing money, sales grew 70% in the first three quarters of 2020 compared to the same period a year prior.
Catherine Wood’s ARK Next Generation Internet ETF [ARKW]picked up 500,000 shares in Roblox, representing 0.47% of the fund.
“Roblox’s blockbuster debut mirrors other gaming and broader tech IPOs that have gone live in the last six months, with high levels of demand on the secondary market after the company lists,” said John Patrick Lee, ETF Product Manager at VanEck, as reported by Reuters.
ESM Acquisition SPAC
ESM Acquisition is the brainchild of commodities legend Mick Davis — chairman of Vision Blue Resources and former CEO of mining and metal giant Xstrata [GLEN]. According to a statement, Vision Blue Resources has set up the SPAC to target businesses that are “positioned to benefit from the global transition towards a low carbon economy”. This includes companies making the shift from fossil fuels, involved in the light weighting and electrification of vehicles and the reduction of carbon emissions.
As reported by Reuters, Vision Blue is betting on supply deficits created by years of under-investment in the raw materials needed for decarbonisation. The gap between supply and demand should create economic opportunity. Joining Davis is John Raymond, co-founder and CEO of private equity firm The Energy & Minerals Group.
With many countries and energy companies having the goal of being carbon neutral by 2050, ESM Acquisition — and its eventual target — could be one to watch. The blank cheque company started trading on 10 March with an initial public offering of 30,000 units priced at $10 each. Since launching, ESM’s share price has remained flat, losing 0.40% (as of 17 March’s close).
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The investment universe is changing beyond all recognition, and with a thematic focus, investors can capitalise on this wholesale disruption. From Genomics to Artificial Intelligence, disruptive innovation empowers companies to displace industry incumbents, and secure majority market share. Opto exists to identify those businesses, and help investors to invest in the next big idea.