• Sun. Dec 11th, 2022

Deliveroo, Darktrace, Trustpilot and Auto1 are among the unicorn companies looking to potentially go public in 2021.

Dec 21, 2020

Late-stage tech companies in Europe are eyeing a record-breaking year for IPOs in the US ahead of a potentially bumper 2021.
The value of VC-backed IPOs in the US in 2020 reached a decade high recently, buoyed by debuts from Airbnb, DoorDash, Snowflake, and Palantir.
A flurry of deals in recent months brought total exit value—or pre-valuation at time of IPO — to more than $253 billion this year. The blew away the high-water mark of $224 billion that was set in 2019, according to PitchBook data.
The US has attracted the bulk of the listing action, with a record $81 billion of initial public offering (IPO) proceeds this year so far, based on Refinitiv data cited by Reuters.
“Fiscal and monetary stimulus due to Covid-19 made cash effectively free, and meant the world could no longer look at valuation models, so they looked to growth,” Per Roman, managing partner at GP Bullhound, told Business Insider. “After people bought big tech, the inability to put more capital into growth led to the autumn of the super IPO.”
Airbnb, for example, debuted at $68 a share but more than doubled that to $144 by trading’s end propelling the home rental startup to a more than $100 billion valuation.
Investors have been desperate to find high-yielding assets amid a global slump in growth and interest rates. That has heralded a boom in hedge fund and private equity interest in tech companies plus the growth of SPACs in the US. A SPAC, or Special Purpose Acquisition Company, is a publicly traded company specifically set up to acquire another firm, effectively taking it public.
Now Europe wants to get in on the action.
Deliveroo and Darktrace are on the roster for 2021 IPOs
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European firms brought in a more modest $19 billion from IPO proceeds in 2020, but a bevy of buzzy tech startups could look to change that in 2021. 
Amazon-backed food delivery startup Deliveroo, Mike Lynch-backed cybersecurity firm Darktrace, online ratings service Trustpilot, used car service Auto1, are all anticipated to list in the next 12 months.
“There has been a perfect storm of vibrant capital markets and a shift in consumption patterns due to the Covid-19 pandemic,” Pär-Jörgen Pärson, general partner at Northzone told Business Insider.
Pärson was an early backer of Spotify, which went public in 2018. He said: “Companies that have rushed to IPOs have seen massive upward valuations, not because of an expansion of multiples but because of an expansion in their underlying business which have outperformed expectations.”
He added: “I’ve never seen anything like this in my whole VC career, and it sets the stage for a 2021 vintage that will see many dozens of exits and IPOs in the European ecosystem.”
Deliveroo, which operates much like DoorDash across Europe and parts of Asia, says it has boomed during the coronavirus thanks to lockdowns, and is now profitable. That’s a turnaround from the beginning of 2020, when the firm said it was on the brink of collapse, helping to persuade the UK’s competition authority to wave through a $575 million funding deal with Amazon.
Deliveroo has appointed Goldman Sachs and JPMorgan to manage an initial public offering (IPO) of between 35-40% of the business in the first half of 2021, Reuters reported. London and New York are the main options for the deal.
“Coming into 2021 we will see a lot more IPOs,” GP Bullhound’s Roman added. “It would be a criminal offense if you were a board member of a valuable private tech company to not look to go public.”
He added, however: “Whether valuations will stay as strong, that’s a different question.”
Local listing likely?
London could see a spate of listings in 2021 despite some of the LSE’s trading rules acting as a deterrent to some tech companies. Companies aiming to list in London currently must have a minimum of 25% of shares available for trading, which makes it more difficult for owners to maintain control.
However, a bumper 2020 has returned some luster to London, according to Barry Meyers, head of UK, Ireland and SSA ECM at JP Morgan, who led e-commerce giant The Hut Group’s giant IPO in September, the index’s largest since 2015.
“The UK market has been perceived to be more attractive since THG’s float and it’s recognised that there isn’t really a valuation difference between the US and London for the highest-quality tech businesses,” he said.
European indices could also be a major beneficiary of local listings, given an increased maturity of both the analyst and investor base for tech companies on the continent.
Investors cite Dutch payments processor Adyen as a recent example. The firm went public in 2018 on the Euronext Amsterdam. And Polish parcel locker business InPost could also IPO in Amsterdam next year amid a boom in e-commerce and fintech.
Amsterdam could further benefit from the uncertainty around Brexit, with London becoming potentially less attractive for European companies looking to list, according to one London-based banker. 
Nonetheless, Europe’s indices are still fighting their corner against the US.
“These markets are years and years behind,” according to Roman, citing Spotify’s decision to list in the US. Another negative factor for Europe could be a return by other industries which were harder hit by the coronavirus pandemic, such as oil and gas. 
“I’m expecting IPO conditions to remain very favorable next year, with all the stimulus and the pipeline we have, 2021 could be one of the busiest years for IPOs we’ve ever seen,” JP Morgan’s Meyers added.