Why is the IPO market on an extraordinary rise?

In India, the IPO market is on an emphatic rise. In fact, during the pandemic record listing of companies was witnessed by spectators. 2021, especially is being a record-breaking year for the fintech IPOs that are getting listed or going public in the market. But the real fact is that the companies and corporations are just getting started.

According to reports, various companies got listed this year, some names were Wise, Robinhood, Coinbase. This was coupled with Zomato, Nykaa, and many more that paved the way for the IPO market in India. With the IPO or going public success of Zomato, which had record listing, with shares being sold at an overvalued price, such progress does seem like a credible lucrative alternative for many. The successes of the predecessor have led the IPO landscape for various companies, especially fintech to grow rapidly.

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Reasons for IPO market boom

Much of the enthusiasm in the market and the momentum has been provided by the Covid-19 pandemic. It is no news that before the onset of the pandemic many fintech startups and companies had gone without any IPOS or large-scale expansion. This begs a pertinent question that what led to such record expansion and why was the pipeline for 2021 the golden opportunity for the fintech?

One reason can be increasing enthusiasm around IPOs given Zomato’s record-breaking IPO that made rounds in the market. It is here worthy of mentioning here that Zomato was a loss-making company with high prospects. This certainly led various other fintech and online food delivery giants to muster courage and go for IPO a record expansion. Thus, Zomato can be rightly called the usherer of change in the IPO market.
But with the record-breaking IPOs taking place in the market, it has also fueled certain concerns.

These are that maybe the market is witnessing a bubble formation that is quite similar to the dotcom boom of 2000. But given the analysis by various experts and analysts, the fintech boom is here to stay, but that it’s only just getting started.

Why fintech boom is here to stay?

As aforementioned, pandemic has been the most significant reason behind the rapidly accelerating fintech market. It is to be noted that such a transformation was due to a necessary digital transformation that was brought about by the pandemic. With the physical life turning online, digital transformation and revenues flowing for the fintech startup were seen. This was coupled with the need to change and resilience that was honed by various businesses around the world.

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With online education booming in the market, various companies like Zoom and Peloton stocks too were seen incurring massive growth. This was mainly due to the fact that many individuals had been forced to work in remote environments.
Though, the pandemic had seen an immense surge in the stocks, some correction in these stocks is being now witnessed in the market.

The motive

It is to be noted that companies usually go for an IPO so as to present some strong exit to the investor on whose venture capital it is built. Although, it is worthy of mentioning here that VCs usually win big when a portfolio company is acquired. But on the other hand, such IPOs can lead to the representation of the huge potential of the company. This can also lead to an invaluable source of revenue that can be acquired for market expansion and public funding.

Thus, this too has been a motivating force behind various IPOs which have tried to use the opportunity of market enthusiasm to bring in funds for expansion and to provide their investors safe exits.

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According to the data released, in the US highest number of IPOs were listed in the first half of 2021. Given that the fintech boom is on its zenith in the covid times, there has been some pressure to provide safe exits by the investors themselves on different CEOs.

Thus, it can be rightfully stated that the fleeting nature of the boom in the fintech industry is the reason for record IPOs in the market. Coupled with this fact, is another interesting analogy that suggests that the widespread listing of the companies has provided a strong ecosystem where the confidence of other companies is booming. This has led various other fintech to follow suit and capitalize.

Attractive global market

The London stock exchange has effectively ramped up its attractiveness for the startups and companies given the recent state of Brexit and covid uncertainty that prevails in the economy. Various recommendations have been made to loosen up the restrictions around the use of a dual-class share. This will effectively bring about flexibility in listings.

Thus, in the context of the global IPO market, it can be stated that the successful reemergence of London as a lucrative, appealing place for tech and fintech firms has brought about the successful rise of the IPO market worldwide. But will this exuberance last in the near future is something we’ll have to wait and watch.



Edited by Sanjana Simlai.

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