Snowflake Inc (NYSE:SNOW) has been the hottest Initial Public Offering (IPO) of 2020 by far. Backed by Warren Buffett, the stock rocketed to $300 after it went public. If you were lucky enough to buy the IPO at its offering price ($120), you’d be sitting pretty today.
But that’s the catch:
You weren’t lucky enough to get the offering price. And unless you’re a well-connected insider, there’s no way you could have gotten it. Only accredited investors participating in IPOs early are able to get the offering price, which generally means well-connected, wealthy people. Your best opportunity is to buy the opening price at the first day of trading. And in Snowflake’s case, that was US$245. If you’d bought the IPO at that price, you’d barely be up today.
Fortunately, there can be opportunities in IPOs–even if you’re a retail investor. They’re rare, but they do exist. Every FAANG stock had an IPO at some point–and they’re all way up since then. In this article I’ll be exploring three Canadian IPOs that could similarly enrich investors.
Lightspeed POS Inc (TSX:LSPD) is a Canadian POS stock that had a very successful IPO. It went public for $16 per share and rose as high as $48 within a few months. LSPD’s first day was not as successful as Snowflake’s, as the shares closed only $2.9 above the offering price. But with Lightspeed, investors had the opportunity to profit in the weeks that followed.
After closing at $18.9, LSPD went up to $21.8 in a single week. By contrast, Snowflake actually declined in its first week of trading on the secondary market. So, from the perspective of a retail investor–who by definition cannot get in at the offering price–LSPD did better in the first week.
Facedrive Inc (TSXV:FD) is a ride-sharing service with a unique premise: reward drivers for driving EVs and hybrids. Its core business model is similar to that of Uber, but with incentives for eco-friendly driving. Since launching, it has expanded from ride sharing to include food delivery, groceries and more.
On its first day of trading, you could have bought the stock for $2.05. Since then, it has risen to $13.84. That’s a 575% gain that an ordinary retail investor could have realized. So far, Snowflake has not delivered such returns.
Docebo Inc (TSX:DCBO) is an online learning startup. It develops a platform for organizations to create self-directed online training modules. Its business idea is solid. In today’s work-from-home landscape, in-person training isn’t always possible. That means there’s demand for online learning at workplaces.
Investors seem to agree that Docebo’s business model is solid. DCBO went public for an offering price of $16 per share, closing at $17.1 on its first day of trading. It went down briefly after that, but now trades at $43. At one point, it went as high as $57, making it a tech stock that rewarded investors handsomely in 2020.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends Snowflake Inc. and Uber Technologies.