3 mammoth IPOs of 2020

Here are the ASX listings that were the most-anticipated or made the biggest splash in this strange year of COVID-19.

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Letters spelling out 'IPO' on yellow background Chemist Warehouse ASX

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2020 was a memorable year.

Why? Because there were a flood of initial public offerings (IPOs)!

I kid — of course, COVID-19 will dominate the chapter when historians write about last year. But the pandemic actually played an important role in encouraging private companies to go public.

This is because after the February–March crash, we saw one of the fastest share market recoveries ever seen.

The market heated up because much of the money handed out from government support and near-zero interest rates headed to shares.

That’s probably not the result that governments and central banks wanted. They would rather the cash be spent on goods and services.

But with Australians feeling uneasy and uncertain about the future, they were saving and investing more than spending.

Anyway, all that money on the share markets meant private companies queued up to cash in. Here are some of the most memorable — the most anticipated IPOs and those with massive market capitalisations.

Nuix Ltd (ASX: NXL)

The December float of this software company was remarkable for many reasons.

First, it had built up a massive market capitalisation over almost 2 decades as a private business. In fact, at $1.7 billion, it was a rare Australian unicorn.

Second, its work is shrouded in secrecy as it assists clients like law enforcement organisations and big government agencies in processing unstructured data. It even had a hand in helping investigative journalists wade through 11.5 million documents known as The Panama Papers.

Third, Macquarie Group Ltd (ASX: MQG) was an early investor that was estimated to have made $1 billion out of the ASX listing.

Fourth, Nuix is currently involved in courtroom drama with its former chief executive Eddie Sheehy over his share holdings. The result of that could impact Nuix financially, as noted in the prospectus and in the media.

Fifth, professional investors absolutely love this company.

Both Tribeca Investment Partners’ Alpha Plus portfolio manager Jun Bei Liu and Prime Value portfolio manager Richard Ivers picked it as the headline IPO of 2020.

“We believe the company will have a long run way of sustained growth for many years to come,” Liu told The Motley Fool last week.

“This company has attracted long-term quality investors to its register and will underpin its outperformance.”

Ivers expected “strong revenue growth and margin expansion” to drive earnings upwards in the coming years.

“It’s in a high growth market, with quality customers that are very sticky,” he told The Motley Fool.

Nuix shares sold for $5.31 during the IPO, but went for $8.24 before markets opened on 31 December 2020. That’s a tidy 55% return in less than a month.

Playside Studios (ASX: PLY)

The electronic games developer, as a private company, had already produced titles in partnership with multinational brands like Walt Disney Co (NYSE: DIS), Warner Bros and Nickelodeon.

So its ASX listing was highly anticipated, and it didn’t disappoint after floating on 16 December.

As of market open on 31 December 2020, Playside had more than doubled its IPO price of 20 cents per share.

“Given the massive growth in the global gaming industry and Playside’s established positioning and strong commercial ties with multinational media companies, we believe 2021 could be a huge year for the company,” Cyan Investment Management director Dean Fergie told The Motley Fool last week.

After the COVID-19 risk settles down, the Melbourne company is set to open an office in Los Angeles to manage its relationships with Hollywood studios.

“PlaySide has in the past few years proven its ability to make games that millions of people love to play while sustainably building a profitable business on a global stage,” said Playside chief executive Gerry Sakkas.

“Having now listed on the ASX, we believe we’ll be able to scale our skills, science and art to unlock significant value for PlaySide shareholders.”

Booktopia Group Limited (ASX: BKG)

The online bookseller often dubbed ‘Australia’s Amazon’ finally made it on the ASX in December.

Ironically it was that reputation that saw its first float attempt scuttled, back in 2016.

Soon after Booktopia announced its intentions to pull off an IPO, Amazon.com Inc (NASDAQ: AMZN) revealed it would start an Australian arm.

With potential investors spooked, the Australian company had no choice to abandon its plans.

“People needed to see that they weren’t going to annihilate us,” Booktopia founder and chief Tony Nash told The Motley Fool.

“We’ve gone from $80 million to over $200 million [of revenue] during that time.”

Nash never considered Amazon a threat, as the US company had long ago moved away from bookselling.

“Books are not a priority for Amazon anymore,” he said.

“It’s less than 3% of their revenue now. Sure, it was 100% when they started out, and is a part of their DNA, but it’s not a priority for them.”

Booktopia’s IPO price was $2.30 per share, with it trading at $2.64 before market open on 31 December 2020.

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Returns as of 15th February 2021

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Amazon, Macquarie Group Limited, and Nuix Pty Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Walt Disney and recommends the following options: short January 2021 $135 calls on Walt Disney, long January 2022 $1920 calls on Amazon, long January 2021 $60 calls on Walt Disney, and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Amazon and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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