Market Volatility Has Not Hindered the IPO Market During COVID-19

For some industries, it was the perfect time to expand.

The COVID-19 pandemic hit the global economy hard. While a few countries have had some GDP recovery, all suffered during 2020.

The misery resulting from global lockdowns has seen companies closed, entire sectors suffer, and unemployment rise—however, some companies and industry sectors have prospered.

Not only have some done well, but there were also a surprising number of IPO offerings for a period of such economic turbulence.

Predictably, most of these IPOs are in similar sectors to those who have prospered – social media, entertainment such as gaming and video streaming, big pharma and vaccine producers, and online goods sellers.

Others are in related fields that reflect the new reality, such as second-hand clothes and mental health.

Who has benefitted most from the pandemic?

The companies that made headlines for profit-making come as no surprise as they are in niches that benefit a population locked at home. They sell everyday goods, entertain, allow for remote working, and deliver food.

For example, America’s two biggest companies, Amazon and Walmart, sell everyday items people need and earned an extra $10.7 in profits compared to 2019. That’s a 56% increase.

Microsoft saw a rise in use of its cloud software, standard work apps like Word and Excel, and gamers using Xbox live. Microsoft Teams went from around 32 million daily users at the start of the pandemic to 145 million at the end of April 2021.

Other well-known pandemic beneficiaries are those who helped people stay home.

Netflix added almost 16 million subscribers in the first quarter of 2020 alone. At the same time, takeout firms saw a 70% year-on-year increase at the end of March that year.

Predictably, money has flooded into the medical sector, especially for vaccine-making companies.

According to a report in the Guardian, in 2021, Pfizer/BioNTech will make between $15 billion and $30 billion, Moderna looks likely to make $18-20 billion, Johnson & Johnson around $10 billion, and AstraZeneca $2-3 billion.

The IPO market has been surprisingly busy

For a period of such high volatility, the pandemic has seen a high number of IPOs and many are for relatively new business. However, most companies going public are in similar sectors to those benefitting from lockdown.

Technology has done well. One of the most significant listings was Coupang, the South Korean e-commerce company valued at $60 billion. Utah-based tech company Qualtrics was another high-value IPO, valued at $15 billion.

Other sectors that saw several listings should come as no surprise in the context of COVID-19. In December 2020, DoorDash saw an 85% shares surge on listing day, benefitting from the demand for food delivery.

Edtech platform Coursera went public in March 2021, having done well from people trying to learn new skills while in lockdown. Gaming companies Playtika and Roblox both had large offerings when they listed in early 2021.

Some industry sectors wouldn’t immediately be obvious but reflect the changing times. Marketplaces for new and second-hand clothes are incredibly popular, with Poshmark and ThredUp both listing this year. FIGS, known for customizable medical scrubs, also had a successful IPO.

Mental health companies are another major sector that has seen a surge in demand as the ongoing pandemic takes its toll.

For example, Cybin (NEO:CYBN) (OTCQB:CLXPF), a Canadian biotech company, was able to go public at the end of 2020, just two years after being founded.

The mental health sector has seen an influx of funding

When it comes to being in the right sector or niche at the right time, biotech companies that deal with mental health are hard to beat. Cybin is an excellent example of this.

Mental health issues such as depression and anxiety have been rising steadily for decades. Between 2005 and 2015, cases of depressive illness increased by almost a fifth.

The pandemic has exacerbated these issues. A survey by the US Census Bureau found more than 42% of people reported feeling some symptoms of depression or anxiety in December 2020, an increase of 11% on the previous year.

A lot of drugs already on the market don’t seem to help everyone who needs them. This is where Cybin came in and began developing an entirely new range of pharmaceutical products. But how did it go public so quickly?

Cybin’s CEO, Doug Drysdale, said, “We started the company in 2018 after seeing loved ones suffering from mental health issues and not getting the help they needed. Our mission was simply to help others. Some types of depression can be more resistant and harder to help. What was required was a new range of more effective pharmaceuticals.

“We gathered an incredible team of scientists and mental health experts. We made fantastic progress in a relatively short amount of time, but the main hurdle remained the same- Biotech requires a lot of research and testing, and that requires funding.

“Soon after the pandemic started and the lockdowns began, mental health was suddenly in the spotlight. People started to realize how bad things might get. Funding increased, and we were able to raise C$88 million. Then, at the end of 2020, just two years after we founded Cybin, we were listed on the stock market. It would otherwise have taken a lot longer.”

Drysdale says, “The increased funding and IPO have fuelled our research. We just completed our 51st pre-clinical molecule study. Without the added impetus of the pandemic, we would have taken a lot longer to have achieved all we have. Cybin was in the right place at the right time, and we can now help a lot more people.”

Throughout history, a lot of companies have succeeded through quirks of fate. The pandemic has shown how randomly sectors benefit or suffer because of global events.

A sudden change can lead to huge profits for well-established companies or the chance to go public and raise funds for newer businesses. In cases like mental health companies, the benefits will be felt for a long time.

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