Preserve a watch on these corporations popping out with their IPOs within the US
The US stock markets are now the mainstay in most global portfolios of Indian investors and are home to several innovative companies developing new products and services in a number of sectors.
These include the more well-known innovative topics such as artificial intelligence and cloud computing, but also newer areas such as alternative food.
“Companies like UiPath and C3 AI are innovative in the areas of robot automation and artificial intelligence and are building a software-as-a-service (SaaS) offering for companies. In the area of cloud computing, several companies such as Crowdstrike, Zscaler and Datadog offer specialized services to help companies better manage cloud-based offerings, ”said Viraj Nanda, CEO of Globalize.
In addition, there are a number of upcoming IPOs that investors from a number of sectors are looking forward to.
In terms of initial public offerings (IPOs), Instacart (grocery delivery service), Rivian (electric vehicle maker), Grab (Southeast Asia’s leading super app offering services such as delivery, mobility and financial services), Discord (VoIP, instant messaging platform) and NextDoor (hyperlocal Neighbors Social Networking App) are some of the major IPOs that investors are eagerly anticipating in the second half of 2021.
Starting today, Indians can invest in US IPOs, but they will buy such stocks as soon as they are listed.
Things to consider
It is important that investors go through a careful process before investing in newly listed companies.
“These companies generally lack financial track records in their filings and share unaudited historical financial statements. Their management also generally has a thin track record of running a public company, so investors have to rely on how they operated as a private company. Newly listed companies are also more volatile in their early profitable seasons as the market aligns with expectations and they evaluate whether they meet the goals set, “said Nanda.
Investors should also keep in mind that first-time institutional investors may want to abandon their holdings within the first 12 to 18 months, with retail investors buying in, creating additional volatility. Therefore, a basic assessment of the company and its valuation is important in order to guide an investment decision.
The China factor
The Chinese government, cracking down on extremely large private companies, has become a major concern for Indian investors who have diversified their portfolios outside of India.
Shares in Chinese car rental company Didi Chuxing Technology Co., listed on the New York Stock Exchange (NYSE) in late June, plummeted after Chinese regulators blacklisted 25 apps related to the platform.
In the past, tough crackdowns by the Chinese government resulted in the Ant Group’s IPO collapse in November 2020, as well as antitrust investigations against Alibaba Group Holding Ltd and Meituan.
However, experts say this could benefit established FAANG stocks.
“Companies like Coupang (CPNG), the largest online marketplace in South Korea, Sea Ltd, the leading Internet platform in Southeast Asia, and MercadoLibre (MELI), an Argentine company providing e-commerce and online marketplace services across Latin America all listed in the US and could give investors exposure to a similar topic as the Chinese companies. In addition, some of the money withdrawn from the Chinese companies would also be reallocated to US tech players, particularly FAANG shares, “said Nanda.
A safer route
There has been strong demand for IPOs as investors look to invest in new companies that have access to differentiated products, themes and regions.
For investors looking for an alternative way to gain exposure to newly listed companies, the Exchange Traded Funds (ETF) route offers indirect exposure to a portfolio of newly listed companies.
Renaissance Capital, for example, offers an ETF that focuses exclusively on the US IPO market. This fund, Renaissance IPO ETF (Ticker: IPO), offers exposure to the most significant newly listed US companies in a portfolio.
“In addition, ARK’s Cathy Wood-managed family of funds has mandates to invest in a wide range of innovative companies, including recent IPOs. The funds, including the Flagship Innovation Fund (ARKK) and the Next-Gen Internet Fund (ARKW), bought into Robinhood shortly after its listing and also include other newly listed companies like Coinbase and Roblox, “added Nanda.
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