Companies are poised to raise more money in 2021 though initial public offerings (IPO) and special purpose acquisition company (SPAC) mergers than in any other year. There's simply a lot of enthusiasm for newly public companies, and companies are cashing in.
In this video from Motley Fool Backstage Pass, recorded on Oct. 25, Fool contributor Danny Vena runs through the IPO and SPAC numbers with fellow contributors Travis Hoium and Jon Quast. All three agree that in this market, it's more important than ever to understand the companies you're investing in.
Danny Vena: With that, let's just kick this off here. I wanted to start by sharing just some data that has to do with what's going on in the IPO space right now. In this case, so as of September the 19th, we've had 19 companies so far this year that have raised more than $1 billion dollars each on the Nasdaq stock exchange and on the New York Stock Exchange. Now, to put that into context, this time last year we only had 15 companies that had achieved that same benchmark.
Now, so far in 2021, and this is just the IPOs, does not include SPACs. U.S. IPOs have raised more than $98 billion compared to just short of $70 billion at this time last year. Now the record for the entire year last year was $102.5 billion in equity raised by IPOs, and now that we are a month beyond that, I think we're probably already exceeded that record. I think this is another record-setting year for IPOs.
Last year was a record. This year is a record. It's crazy what's been going on in the IPO market? If you look back toward the end of last year, we had half a dozen companies that more than doubled their stock price on the day of the IPO. In many cases, this was companies who had already issued their initial range, adjusted their range that they were going to price the stock at, and then eventually priced it above the range.
There's a lot of excitement in equities and in IPOs right now. But that also comes as a cautionary tale because even more so than we have seen previously, a lot of IPOs are climbing on their first day. But then you get within a few weeks or a few months and they lose half to three-quarters of their value, so just something to keep an eye on.
Anybody want to chime in on that?
Travis Hoium: Yeah, sorry, I wanted to add about SPACs because that's another thing that since the SPAC craze is still relatively young, I think investors really need to keep an eye on the details of those SPAC companies going public, and I'll talk about that a little bit with Wynn Interactive [Austerlitz Acquisition Corporation (NYSE:AUS)]. But the details around that $10 price, what the redemptions rules are, what happens after the company completes its SPAC and what the future of the company is. Because at the end of the day, whether you're buying an IPO or a SPAC, you're buying the underlying company, and so we want to make sure that strong as investors, that can be both an advantage and a disadvantage for those of us buying in public markets. Just something to keep in mind.
Vena: Absolutely right.
Jon, your thoughts?
Jon Quast: Well, just the statistics that you shared, Danny, are really mind-blowing because in many ways, 2020 felt crazier to me, and I know it's anecdotal, but just the amount of companies that were coming public in the valuations that they were coming public at, 2020 just felt a lot more heated than 2021 has felt so far. But as the statistics that you shared bear out, this is actually even a hotter year than it was last year.
I think that the cautionary tale there that we're mentioning is that it's easy money for companies right now in many ways. That brings good companies to market. It also brings bad companies [laughs] to market because they see the opportunity.
Hoium: I just want to add to what Jon just said about easy money. I just looked up on Crunchbase. This week -- and I had to go through it to make sure this is correct -- Crunchbase is announcing this is primarily in private markets, so this captures a lot of venture capital funding. There have been 601 funding rounds and $20.6 billion in total funding.
There's money flowing everywhere, whether it's SPACs or IPOs, or in private markets through venture capital, acquisitions from more established companies, the tide is lifting all boats, whether or not that's good for any given company long term is maybe a little bit of a different story.
Vena: I think it's really interesting that if you go back to earlier this year, after the frenzy that we saw at the end of last year with SPACs that when word got out that the SEC was looking into that, and they were going to issue some regulations, all of a sudden everybody ratcheted back on those SPAC acquisitions for several months.
What actually happened was the SEC said, "We're going to put some rules around these warrants that are being issued with the SPACs." Then shortly thereafter, everything just took off again. It was really interesting to see that ratchet back so quickly. Then just that pause and then everything ramp right back up, and we're still looking at a record year for SPACs as well.