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IPO Stocks

Updated: Jan. 3, 2022, 3:39 p.m.

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. While not every IPO stock will be a winner, some of the most valuable companies in the world such as Amazon (Nasdaq:AMZN) and Apple (Nasdaq:AAPL) were once IPOs, or initial public offerings, and have made early investors millionaires.

IPO stocks to watch in 2021

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 issues.

Among the recent IPOs to watch are the following:

1. Robinhood Markets

Not only is Robinhood (Nasdaq:HOOD) one of the hottest IPOs to hit the market this year, the disruptive online brokerage may be the most talked-about company 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 (NYSE:GME) and AMC Entertainment (Nasdaq:AMC), as well as the swell in cryptocurrency prices.

Robinhood also has the numbers to back up the hype. In its first earnings report as a publicly traded company, revenue jumped 131% to $565 million, and funded accounts climbed from 9.8 million to 22.5 million. It even posted a profit of $57.6 million in the quarter, a rarity for a high-growth IPO stock.

While its 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 crypto boom officially went mainstream in April 2021 with the successful debut of Coinbase (NASDAQ:COIN), 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 avoids 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 nearly $430 in its first trading days. In the following weeks, however, the stock's price tumbled, along with the prices of cryptocurrencies in general, after Tesla (NASDAQ:TSLA) CEO Elon Musk said that his electric vehicle (EV) company would stop accepting Bitcoin (CRYPTO:BTC).

Expect Coinbase’s value to be closely linked to that of the most popular cryptocurrencies such as Bitcoin, Ethereum (CRYPTO:ETH), and Dogecoin (CRYPTO:DOGE) for the foreseeable future.

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 an operator of a platform that allows anyone to make a video game.

As of July, Roblox had more than 8 million developers on its site and 46.6 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. Airbnb

Airbnb (NASDAQ:ABNB), the home-sharing pioneer, was in panic mode early in the pandemic as global travel virtually ground to a halt. The company was forced to raise money at half its prior valuation and laid off nearly a quarter of its employees. However, business recovered quickly as people looked to escape from cities and find long-term stays with more space.

Airbnb's IPO hit the market in December 2020, and the stock price more than doubled on opening day, reaching a $100 billion market value. As with companies such as Zoom (NASDAQ:ZM) and Alphabet’s Google (NASDAQ:GOOGL) (NASDAQ:GOOG), Airbnb’s name has become a verb -- a clear demonstration of its market power.

By the second quarter of 2021, the company's revenue had already recovered to above pre-pandemic levels even as the health crisis endures, showing its ability to adapt. While its hotel competitors have struggled, Airbnb's share of the global travel market has grown significantly during the pandemic.

5. DoorDash

DoorDash (NYSE:DASH), the leading food delivery app, now claims a 55% market share in the U.S. It separated itself from the pack during the pandemic by focusing on increasing restaurant delivery orders instead of cutting costs for the restaurants. Like Airbnb, DoorDash also completed its IPO in December 2020, and its stock price also soared -- by 86%, for a market cap of $72 billion.

The company has developed proprietary technology for restaurants to use and makes fast delivery a priority, ensuring that food arrives hot. Those efforts, along with a focus on the suburbs, have helped DoorDash win over big chain restaurants. Consequently, DoorDash is the food delivery market leader today, having surpassed Uber (NYSE:UBER) and Grubhub (NASDAQ:GRUB).

DoorDash has put up strong growth through the first half of 2021, although it sees that momentum cooling off in the second half of the year. The company is diversifying beyond restaurants, with a long-term aim of challenging Amazon as a clearinghouse for all things delivered.

Upcoming IPOs: Companies going public in 2021

Here are some other big-name companies making plans to go public in 2021:

1. Instacart

This leader in online grocery delivery is also planning to go public in 2021, according to Reuters. A public stock offering has been on the horizon since CEO Apoorva Mehta declared the company’s intentions in September 2019.

Instacart has also been a big winner during the pandemic. Grocery delivery has been in high demand, and the company raised $200 million at a $17.7 billion valuation in October 2020.

The Instacart IPO is expected to value the grocery delivery specialist at around $30 billion. The company is reportedly considering a direct offering and may not go public until late 2021.

2. Rivian

This electric vehicle maker is the latest EV stock expected to make a splash in the public markets. According to Bloomberg, the company is aiming to go public as soon as September 2021 after raising $2.65 billion in January at a valuation of $27.6 billion.

EV companies such as Tesla and Nio (NASDAQ:NIO) have delivered huge returns to investors since the pandemic began, so it’s not surprising that Rivian would seek to take advantage of investor interest. The company may be best known for its deal to manufacture 100,000 custom electric vans for Amazon by 2030.

3. Stripe

As the most valuable privately held tech startup 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 in the process. The wire service also said that the company was planning on doing 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.

Given that rich valuation, it’s not surprising that a listing would be imminent as early investors and insiders need the company to go public to cash out their holdings.

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