The U.S. IPO market has been sizzling since the successful offerings from Levi Strauss LEVI, Lyft LYFT and PagerDuty PD. Zoom, a video-conferencing software, and Pinterest, an online photo-sharing platform, are set to debut today on the Wall Street with much hype. Like many of its new peers, Zoom and Pinterest will have dual-class shares (read: U.S. IPO Market Buzzing Hot: ETFs to Tap the Boom).
Given the solid demand for Zoom recently, the company raised its IPO range to $33-$35 per share from the originally $28-$32 range, and finally priced its offering at $36 a piece. This gives Zoom, set to list on the Nasdaq under the ticker “ZM”, an estimated valuation of about $9.2 billion.
Zoom is a fast-growing company with revenues more than doubling to about $330 million in fiscal 2019 (ending January 2019) from $150 million in fiscal 2018 and $60 million in fiscal 2017. Losses shrunk from $14 million in 2017 to $8.2 million in 2018 and just $7.5 million in 2019, signaling its rapid growth.
Pinterest will be listed on the New York Stock Exchange under the ticker “PINS.” The company priced its IPO at $19 per share, above the targeted range of $15-$17, valuing the company at around $10 billion. The image search company is not yet profitable but moving significantly closer to profitability with a net loss of $63 million. Pinterest’s revenues jumped 60% last year to $756 million.
Pinterest has 265 million monthly active users and its user base is still increasing at a considerable pace, particularly abroad.
Other Hot IPOs
Uber Technologies has filed for an IPO with the New York Stock Exchange under the symbol “UBER.” This global ride-hailing startup is looking for a valuation of $100 billion with a potential price range of $48-$55 per share and could be the biggest IPO since Alibaba Group BABA went public in 2014 (read: IPO ETFs in Focus Ahead of Uber's Public Debut).
Other IPOs this year include online marketplace and hospitality service company Airbnb, the workplace messaging app Slack, secretive data analytics and intelligence firm Palantir Technologies, no-fee trading platform Robinhood, food delivery app Postmates, and shared office space startup WeWork.
ETFs in Focus
As investing in multiple IPOs at the same time can be a difficult task, investors can easily tap the IPO with two domestic-focused ETFs discussed below:
Renaissance IPO ETF IPO
This fund provides exposure to the largest and most-liquid newly listed companies by tracking the Renaissance IPO Index. New companies seek inclusion on a fast-entry basis on the fifth day of trading. The fund currently holds 71 stocks in its basket, with each accounting for less than 7% exposure. Technology is the top sector accounting for 34.7% share while communication services and real estate round off the next two spots with double-digit allocations each. The fund has amassed $36.9 million in its asset base while trades in a light volume of about 15,000 shares, probably implying additional cost beyond the expense ratio of 0.60%. The product has surged 30.5% in the year-to-date period (read: Uber, Lyft, Slack, Pinterest, Other Hot IPOs & ETFs: What You Need to Know).
First Trust US Equity Opportunities ETF FPX
This ETF focuses on the largest, best-performing and most-liquid U.S. IPOs, and follows the IPOX-100 U.S. Index. New companies can find entry into the fund’s holding after trading for a minimum of 100 days. In total, the fund holds 100 securities in its basket, with the largest allocation going to the top firm (9.2% share) while other securities hold no more than 4.71% of the assets. The product is tilted toward information technology at 34.5%, while healthcare and consumer cyclicals round off the next two with double-digit exposure each. The fund has accumulated $1.1 billion in AUM and witnesses volume of about 101,000 shares per day. It charges 59 bps in fees a year and has gained 20.2% so far this year.
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