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Tech firms are about to go public – that's what we've discovered from the latest wave of IPO registrations

tech-firms-are-about-to-go-public-thats-what-weve-discovered-from-the-latest-wave-of-ipo-registrations

A DoorDash Inc. delivery person places an order in an insulated bag at Chef Geoff's restaurant in Washington, DC.

Andrew Harrer | Bloomberg | Getty Images

Tech investors have a lot to read during Thanksgiving in the form of IPO filings. DoorDash, Airbnb, Affirm, Roblox and Wish have all released their prospectuses for the past eight days and plan to go public before the end of the year.

They are taking advantage of a post-election rally that has brought US stock indices near record highs and clear demand in the public market for high-growth assets.

All five companies serve consumers and can expect a busy holiday season with soaring coronavirus cases and a drastically changed economy. It's a very different list of players from the previous September rush, when a number of enterprise software companies like Snowflake and Palantir made their debuts.

They each have different narratives associated with the coronavirus.

DoorDash sales more than tripled in the third quarter as many restaurants turned to delivery as their primary source of business. The kids game platform Roblox saw revenue grow 91% year over year in the most recent quarter as it benefited from school closings and more users looking for ways to stay away from their friends.

Affirm, which offers online credit to outlets for consumers buying clothing, electronics, housewares, and other items, nearly doubled sales in the most recent quarter as people turned to the Internet for their purchases. Wish, an online discount retail store, is also benefiting from the e-commerce boom. However, growth in the third quarter was more subdued at 33%, partly because most of the traders are based in China and are still grappling with supply chain challenges.

Airbnb is the company hardest hit by the pandemic that has flattened the travel industry. But it has found a niche in combining vacation homes with remote working and is positioning itself for economic recovery.

Here's what we learned from each company's S-1 filing, listed in order of filing:

DoorDash

Tony Xu, co-founder and CEO of DoorDash Inc., smiles during the Wall Street Journal's Tech Live conference in Laguna Beach, California, the United States, on Tuesday, October 22, 2019.

Martina Albertazzi | Bloomberg | Getty Images

Read the full submission here.

Top line: Third quarter revenue rose to $ 879 million from $ 239 million a year ago, driven by orders up 237%. In the first nine months of the year, incoming orders rose from 181 million in the same period last year to 543 million.

Bottom line: The net loss decreased from $ 152 million a year ago to $ 42 million. By the third quarter of 2020, DoorDash had a positive contribution margin of 23% compared to a negative contribution margin of 32% in the previous year, which means that the company makes money on average with every order.

Covid story: DoorDash has used its stock gains over the past few years – it has nearly 50% control over the U.S. food delivery market – to introduce its brand to consumers at a time when they are ordering groceries at unprecedented prices. Americans will eventually eat out again, and restaurants that rely on delivery will be constantly looking for cheaper options. DoorDash warns in its prospectus: "The circumstances that have accelerated the rise in total orders due to the impact of the COVID-19 pandemic may not continue in the future and we expect the rate of growth in total orders in future Periods will decrease. ""

Airbnb

Read the full submission here.

Top line: Third quarter revenue declined 18% year over year to $ 1.34 billion. It's a big drop, with a steeper drop in bookings in the fourth quarter as the pandemic keeps people close to their homes. But people are using Airbnb for non-urban rentals and to find creative ways to work remotely. This helps the company weather the crisis better than hotels, airlines and online travel agencies.

Bottom line: Airbnb posted net income of $ 219 million for the third quarter, a slight decrease from last year. The company reduced its workforce by 25% in May and reduced its marketing budget, which resulted in a 75% decrease in sales and marketing costs.

Covid story: Airbnb was poised to become the tech IPO of 2020, valued at $ 35 billion and an ongoing promise to change the way consumers travel. When business stalled at the end of the first quarter, Airbnb had to turn to debt markets, borrow $ 2 billion in high yield, and lower its valuation. Potential long-term investors may consider Airbnb's ability to adapt to a new reality faster than its competitors as a reason to jump in, along with the expectation that we won't be locked out forever.

To confirm

Max Levchin, co-founder of PayPal and Affirm

Contributor | Bloomberg | Getty Images

Read the full submission here.

Top line: For the period ended September 30, revenue increased 98% year over year to $ 174 million. The greatest growth was seen in the dealer network, the online companies that offer affirm credits when purchasing items. The company works with over 6,500 retailers including Peloton, West Elm, and Pottery Barn, and is partnered with Shopify.

Bottom line: Affirm's net loss decreased approximately half year over year to $ 15.3 million for the quarter. On a percentage basis, the largest increase in costs was in sales and marketing, where expenses quadrupled to $ 22.6 million due to the new relationship with Shopify.

Covid story: The number of active consumers rose to 3.9 million in the quarter from 2.4 million a year ago. The direct-to-consumer trend, which is fueling online retail and driving Shopify's inventory up, is also driving Affirm. Look no further than Peloton, which accounts for 30% of Affirm's sales and is thriving on the home boom. Peloton's sales more than tripled in the most recent quarter, and the stock is up 290% this year.

Roblox

A rendering of the hit Roblox video game Jailbreak.

Source: Roblox

Read the full submission here.

Top line: Third quarter revenue increased 91% to $ 242 million. The company's gaming platform allows kids to create an avatar to record between games and spend money on a virtual currency called Robux for premium features. The daily active users almost doubled to 36.2 million in September by the same quarter of the previous year. A metric the company calls "hours busy" has more than doubled to 8.7 billion.

Bottom line: The third quarter net loss more than doubled year over year to $ 48 million. Selling and marketing expenses were unchanged, but developer exchange fees rose sharply, tripling to $ 81.9 million. That is the money Roblox shares with game developers when consumers spend money on their titles. "Many users end up becoming developers and developers, and almost all developers and developers started out as users," the company's prospectus said.

Covid story: In addition to spending more time and money on the app because they are at home, users also host virtual birthday parties and other gatherings on Roblox, which is another source of income for the company. While Roblox attracted a lot more users during the pandemic who are likely to continue using the app, when the schools reopen, there simply won't be as many screen hours available.

wish

Read the full submission here.

Top line: Third quarter revenue increased 33% to $ 606 million. Known for deep discounts, Wish continues to benefit from the move to online retail and the increased convenience consumers have when purchasing items on their phones. The monthly active users increased in the first nine months of 2020 from 81 million in the same period last year to 108 million.

Bottom line: The net loss decreased from $ 134 million to $ 99 million as sales and marketing expenses decreased 13% as the company shifted its investments to its logistics platform.

Covid story: Wish was particularly exposed to the early stages of the pandemic as most merchants are based in China, where Covid-19 first spread. Sales fell in the first quarter and rose again in the second quarter. However, the company said traders continue to suffer from supply chain disruptions and slow delivery times to different parts of the world.

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Katherine Clark