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Couchbase

Couchbase is a database software firm that helps corporate customers like eBay, Cisco Systems, Intuit, and PayPal Holdings manage databases on web and mobile application through its NoSQL cloud-based service. Founded in 2011, the company has registered for a stock market debut that is expected to come in June 2021.

Couchbase has seen strong growth over the past year, specifically since the start of the pandemic as demand for data storage and processing soared due to the adoption of remote working. Its growth has also meant it has had to enhance its portfolio. In June 2020, Couchbase debuted a managed version of its database that runs on Amazon Web Service. More recently, it is added support for Microsoft Azure.

Since its inception, the company has raised $251million in venture investments, with backers including GPI Capital, North Bridge Venture Partners and Accel. Its popularity among investors comes as no surprise with around a third of the Fortune 100 using its database to power their business applications.

Snowflake, a rival cloud-based data-warehousing company, went public last September, reaching a valuation of $33 billion, making it the largest software IPO in history. This means Couchbase’s IPO will be a pivotal moment in the company’s history and for the industry in general.

Robinhood

Founded in 2013, Robinhood offers commission-free trading through its website and mobile app, while also allowing users to buy and sell cryptocurrencies. The rise of the trading platform has been extraordinary. Between 2013 – 2020, the platform gained 13 million users, averaging a total of one million new users per year. However, in 2021, its user base skyrocketed with an additional 6 million users joining the trading platform in the first two months of the year.

The company’s recent growth in popularity has been down to young retail investors, predominantly millennials, who have taken a liking to the app’s slick user and customer experience. Its popularity isn’t just with young investors; a plethora of companies have also invested in the platform. In February 2021, Robinhood announced that it had raised a further $3.4 billion in an investment round featuring Ribbit Capital, ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA.

However, while Robinhood has expanded rapidly over the last year, it hasn’t come without some public backlash and regulatory scrutiny. Regulators in Massachusetts are looking to ban its citizens from trading on the app, claiming that Robinhood’s gamified investing platform caused its customers to take on too much risk, thereby failing the state’s fiduciary rules.

Despite this, Robinhood generated $682 million in payment-for-order-flow revenue in 2020, which represents a 514% increase year-on-year. It’s reported that the company’s IPO valuation could be around $50 billion.

The Fresh Market

The Fresh Market is a retail chain that supplies high-quality food products. The grocer operates in many competitive South-eastern markets, with conventional grocers as well as speciality chains and discounters upgrading their assortment of natural and organic products. In March 2016, Fresh Market was acquired from Apollo Global, a private investment company, at $1.36 billion.

The company’s performance has improved in the years since Apollo Global Management took it private, and the pandemic has accelerated the chain’s rejuvenation and growth. As of late October 2020, Fresh Market had around $187 million in unrestricted cash and it recorded sales of $1.7 billion over the 12 months ending 25th October. The company also saw sales rise by an estimated 20% in 2020, which was for a range of factors including a change in pricing, investment in perishables, expansion of home deliveries, a pickup service, and a rise in pantry loading - as consumers increased transaction sizes while lowering the number of trips to the store during the COVID-19 pandemic.

The number of shares to be offered and the price range for the proposed offering have not yet been determined. However, Fresh Market expects to use the proceeds of the offering for general corporate purposes, which may include the repayment of indebtedness.

Databricks

Databricks is a startup company that provides software for fast data processing and analysis preparation and was founded in 2013 by the creators of Apache Spark, MLflow and Delta Lake.

2020 was a spectacular year for tech companies across the globe as many transitioned and migrated online – with Databricks also benefitting. The company claims to have passed $425 million in annual recurring revenue, a year-over-year growth of more than 75%. This is no surprise given that over 5,000 companies including CVS Health, Comcast, Condé Nast, Nationwide, and 40% of the Fortune 500 companies, currently rely on Databricks’ unified data platform for analytics, machine learning and data engineering.

Databricks’ future potential and expansion has not gone unnoticed with many prestigious and successful money managers and venture capitalists having already invested heavily in the company. Databricks has had seven major rounds of funding since its founding and has raised a total of $1.9 billion from a total of 28 investors. The company’s latest round of Series G late-stage venture financing raised a total of $1 billion from 23 investors. These investments are for good reason; powered on the cloud by Delta Lake, the Databricks Lakehouse platform allows companies of any size to efficiently consolidate all of their data in one place.

Databricks’ value during the IPO is not confirmed but it is speculated to reach $35 - $50 billion according to the Business Times.

Couchbase, Robinhood, The Fresh Market and Databricks are all key players within their respected sectors. While it’s important for an organisation to have the backing of investors and have a strong customer base, this doesn’t always mean their IPO will skyrocket, as we saw with the Deliveroo IPO. All four companies provide a unique offering that sets them apart from the competition and that’s why it’s worth keeping them on your radar for June.

Now we’re a few months into 2021 and we’ve already seen some incredibly high-profile IPOs including Roblox, Bumble, Moonpig and Dr Martens. However, there are plenty more to come, and these are just some of this year’s most likely major offerings.

Deliveroo

Food delivery company Deliveroo is planning to list on the London Stock Exchange where it is expected to be valued at over £5bn. However, some outlets have reported that the valuation could be as much as £7bn, in which case, early investors in Deliveroo could make around a 60,000% return on their investment once it goes public. Stockbrokers can’t take part in the IPO, but private investors can do so through a £50m UK Deliveroo customer offer. This will occur through a third party called PrimaryBid where customers can initially invest up to £1,000.

Robinhood

Robinhood experienced record growth during the COVID-19 pandemic, attracting millions of locked-down Americans to its gamified trading app. It has been immensely successful since its inception and was valued at $40 billion in February 2021. However, it has been embroiled in plenty of controversies over the years, most recently the GameStop saga which resulted in its CEO Vladimir Tenev testifying before Congress. Robinhood is going public on the Nasdaq exchange, according to CNBC, though both organisations declined to comment.

Nextdoor

Some experts believe Nextdoor, the US-based social media service for neighbourhoods, has the potential to be the biggest IPO of 2021. It’s set itself apart from other platforms like Facebook and Twitter as location determines absolutely everything the app has to offer. The company reports that 1 in 4 American neighbourhoods use Nextdoor with users growing 80% month-on-month since the start of COVID-19 — the question is whether they can sustain once the pandemic ends. Nevertheless, Nextdoor has certainly established itself as a player in the social media landscape and is expecting a $4-5bn valuation.

Chime

Chime is an award-winning, American, online-only bank and is especially unique in that its users can get paid two days before their paychecks. It was the fastest-growing challenger FinTech bank of 2019 and has proven popular during the COVID-19 pandemic too. Towards the end of 2020, Chime even became EBITDA (Earnings Before Interest, Taxes, Debt and Amortization) positive, which is unusual for a startup in its early stages and is sure to make it highly sought-after once the IPO hits the market.

Darktrace

UK cybersecurity giant Darktrace is currently preparing to target a £4bn IPO, potentially making it one of the biggest London stock market debuts of 2021. The company has faced some challenges amidst its plans. Founding investor Mike Lynch is facing US extradition proceedings (though he is not involved in running the company), while Swiss bank UBS recently resigned as one of the lead investment banks on the IPO. However, earlier this month, Darktrace appointed former BT chief executive Sir Peter Bonfield to its board, while it has also been reported that they appointed former Capita executive Gordon Hurst as chairman to guide the company through its IPO preparations.

Wise

TransferWise rebranded as Wise in February 2021, with plans to offer a wider range of products ahead of a potential IPO bid. The British-based money transfer company was recently valued at $5bn by private investors last summer, though analysts believe it may be worth far more now. Wise has also been profitable for four consecutive years, while Sky News has reported that Goldman Sachs and Morgan Stanley will be leading the IPO of one of the UK’s most valuable tech companies ever.

Trustpilot

According to Bloomberg, Trustpilot’s IPO values the company at as much as £1.08bn, with trading scheduled to begin on the 23rd March on the London Stock Exchange. The consumer reviews service hosted 120 million reviews and saw revenue increase to $101.9m in 2020 — it makes money by selling subscriptions to businesses, allowing them to use reviews for marketing purposes and engage with customers on the platform. Trustpilot also narrowed its pre-tax losses in 2020, from $22.6m in 2019 to $12.9m last year.

PensionBee

UK online pension provider PensionBee recently brought forward its plans to list on the London Stock Exchange this year and, according to the Financial Times, has offered customers an opportunity to “register their interest” in its IPO. The company has attracted over 119,000 customers since its 2014 launch and reported a 77% increase in revenue to £6.3m in 2020. Founder Romina Savova told the publication that PensionBee had nearly doubled its users and assets under management every year since its launch and believed the company could continue to grow at a “high double-digit” given the “large” UK market available.

But around thirty years later, it became apparent that GameStop had missed a trick. They may have been tech-savvy in the 80s, but they hadn’t envisioned a future where sales of certain goods were more common online than in old-fashioned brick-and-mortar stores. Their sales fell while overheads rose and investors started to unload their holdings, sending the stock price down from just under $60 in November 2013 to around $3 in the summer of 2019. Stores then took another hit thanks to the coronavirus pandemic. Little did they know that they were about to take centre stage in such a major global story - sure to have far-reaching effects in the trading world going forward.

Wall Street’s approach to GameStop

A bunch of Wall Street players were looking for companies they thought would go bust due to outdated business models. They decided to speed up the process and make a bit of money by ‘shorting’ the stock of companies like GameStop. The aim was to drive down the price (preferably to zero), so when GameStop went out of business, they could buy back the now-worthless shares and pocket the difference.

But while their hypothesis seemed solid, the real world stuck a spanner in the works. There were traders prepared to take the other side of this bet. Some were Wall Street players, while plenty of others weren’t. They did their homework the old-fashioned way and studied the company’s accounts. Between August 2019 and August 2020, the share price of GameStop hovered between $3 and $6. To the bulls, this looked irresistibly cheap given the company’s assets. Buyers came in and the stock broke out of this range, spending the next few months butting up against resistance around $20, where most of the short-selling took place.

Short-sellers vs WallStreetBets

But those on the bullish side believed that even at $20, shares in GameStop were undervalued. They were convinced the company could be worth three times as much. One of these traders was a prominent contributor to the ‘WallStreetBets’ subreddit. The GameStop bulls also noticed the large short interest in the stock, created by Wall Street firms hoping the business would go bust. There was little doubt that GameStop was vulnerable given their miserable online business and the ravages inflicted by the coronavirus pandemic. But short-sellers also have weaknesses that can be exploited. After all, a stock can only fall to zero, while in theory there’s no limit to its upside. Incredible as it sounds, the overall short position on GameStop was larger, thanks to derivative trades, than the shares in existence. That meant further instability. Should a pack of determined buyers get together to take advantage of this fact, all hell could break loose. A catalyst was all they needed, and that’s exactly what they got.

In early January, GameStop announced the appointment of three new executives to its board — Ryan Cohen, the founder and former CEO of an e-commerce business called Chewy Inc., and two of his colleagues. Their involvement raised hopes that GameStop was serious in boosting its online presence and the stock jumped from around $20 to just below $40 in a single day. But it didn’t stop there. More Reddit buyers poured in, bulled up by the opportunity to give hedge funds a bloody nose. Less than a fortnight later the stock broke above $100. Three days later it traded at $482 per share, helped on its way by a cryptic tweet from Tesla founder, Elon Musk. It subsequently fell, ending that day below $200 before doubling the next day.

The GameStop aftermath

It now looks as if we’re past peak GameStop as the shares hover around $50. Of course, that’s not a bad return if you were buying at $20. It’s also close to what many early investors believed the real value of the company was. But for those who came late to the game, it has proven expensive. Imagine paying about $493 for a share that’s now worth $50. On the other hand, whoever sold up should be pleased. But other aspects are making this event so unusual. There was anger when Robinhood and other trading apps brought in restrictions, such as preventing their customers from opening new positions in GameStop stock. This may have been perfectly legal and done in response to funding shortages, but the perception was that such apps were helping Wall Street by punishing the little guys.

This wild trading wasn’t confined to GameStop either. Suddenly, hunting out and buying the stock of companies with large short interest became the only game in town. It didn’t take long before similar stocks began to skyrocket, with AMC Entertainment, Eastman Kodak, Bed, Bath & Beyond, Blackberry, Virgin Galactic and Nokia all seeing their shares soar as buyers rushed to take on the evil short-sellers of Wall Street. Even silver, a commodity commonly thought to be artificially suppressed by major financial institutions, came into the sights of the Reddit crowd focused on one single factor – short interest.

Will the regulators step in over GameStop?

There have been calls for the regulators to get involved. Not to address short-selling (as Elon Musk is calling for) but to investigate social media platforms like Reddit and trading apps like Robinhood over claims that users were colluding to manipulate markets. For a time, it seemed like regulators were prepared to sit this one out, just as they should. But now it looks as if the Department of Justice, the Securities and Investment Commission, and the Commodity Futures Trading Commission are all after their pound of flesh.

However, there’s no obvious evidence that anyone did anything untoward. Reddit users did less combined than many Wall Street players do daily, while the market functioned properly throughout, with trading limits kicking in when the share price hit pre-set levels. As to Robinhood and other brokers imposing trading restrictions, I do not doubt that it’s all covered in their terms and conditions. To those customers hurt by this, then it’s probably best to find another broker. I have to say with immense pride, that our customers at Trade Nation were able to trade GameStop without restriction throughout this period.

What does GameStop mean for the future of short-selling?

So, where does this all leave us? Well, short-sellers have been caught out before — just look up a chart of Volkswagen from October 2008. However, people do have short memories, so it may be a few years before we experience such an egregious example of a short squeeze. After all, everyone is now on the lookout for another GameStop.

Ultimately, the market is a two-way thing requiring buyers and sellers. There’s one key thing the two sides must agree on and that’s the price at which they make the exchange. This is usually a straightforward process, but sometimes things can get out of hand. So, I have little doubt there will be other unusual money-making, and money-losing, market events. The trouble is working out where they will happen next. If you find one, make sure you let me know.

“It’s been an exciting few months for The Chocolate Teapot Company “TCTC”. Despite the difficulties we are still encountering utilising the product for its primary purpose, we are confident we shall achieve planned sales and profitability in the foreseeable future. We were delighted to have completed the merger of the company with the Special Purpose Acquisition Corporation “Mooncheese II” in December for $2 billion. The subsequent dramatic rise in TCTC’s stock price demonstrated the market’s long-term engagement with our future plans, including our new range of digitised Chocolate and Marshmallow toothbrushes.

The success of the TCTC proposition, and investor faith we will perfect chocolate technology to address the environmental imperative of replacing metals and plastics in high-temperature liquid vessels in the digital economy, was conclusively demonstrated by the stock’s rise from $2.57 last year to $483 in January 2021. We were one of the most discussed stocks on a widely read retail-investor discussion site. 

We were particularly delighted to have been described as a “187-bagger”, even though none of our chocolate tea-pots are currently designed for that number of tea-bags.”

                                                                                     -Barnby T. Yorkshire, CEO & Founder of The Chocolate Teapot Company

Coincidently, GameStop, the US games company that improbably rose from $2 to $480, was also a 187-bagger for some investors who timed their entry and exit perfectly.

Unlike The Chocolate Teapot Company, GameStop’s rise provides a great illustration of a truly insane market. Not a single professional analyst, market commentator or stock picker has had anything positive to say about the firm. Everyone knew it was likely to end up as the next dead retailer – a bricks-and-mortar shop in a digital world, as obsolete as Blockbuster Video. Unsurprisingly, smart Wall Street hedge funds were shorting the stock.

That was until a chap who once worked in marketing for a US trust company started saying positive things about it on the WallStreetBets subreddit. Despite the fact he apparently is a CFA charter holder and passed all of his securities exams, he started making videos about what a great company GameStop was and hung around on website stock boards pumping his positive story.

Last year, he had less than 600 social media followers. This year, Reddit users found his “Roaring Kitty” comments and the photos he’d posted of his rising profits in the stock. The price of GameStop went ballistic. When The Wall Street Journal interviewed him in the middle of the madness, he was sitting on a $33 million profit on his position.

A horde of retail radicals piled into the stock, and after being fed the tale about how some funds were short, they’d turned buying the stock on their RobinHood free trading apps into a holy crusade against Wall Street. They urged each other forward, driven by memes like“This is the way” as they were buying more and more, pushing the price higher. They scored an “enormous” victory by crushing a hedge fund caught on the wrong side of the buying pressure.

Some people claim to have made lots of money – perversely as many are now bragging about how much they have subsequently lost. But, the “ballistic” stock price trajectory means that what went up, came down just as steeply. A whole number of greater fools held on at the top and, as the price tumbled, they inevitably made friends with the big round friendly thing approaching them at speed…the ground.

As they say, it’s not the fall that kills you. It’s the sudden stop at the bottom.

GameStop, SPACs, Bitcoin and Tesla sum up the modern investment age. These “meme” stocks swim in a sea of ill-informed social media comment, outright fake-news, and unsupportable opinions presented as irrefutable facts.

It’s led to insane speculation, further fuelled by ultra-low interest rates that make stocks look the best relative investment value. Many of the millions of young millennials and Gen Ys and Zs stuck at home because of COVID-19 lockdowns have been attracted to stock trading sites like RobinHood and the gamification of the stock market these apps have created. A few new retail investors have made off like butchers’ dogs with the sausages – unable to believe how easy it is to pick winners and see their initial investments double, triple or more in today’s ‘the-only-way-is-up’ market.

Ultimately, we all know that most retail investors will likely lose.

Those of us slightly longer in the tooth, greyer in the lockdown beard, and less inclined to gamble the retirement pot… are now consumed with FAMO or Fury At Missing Out. If only we’d bought Bitcoin last summer, or why didn’t we listen to the prophets of Tesla and followed the stock higher. There is nothing like opportunities missed to make a second lockdown and a bad winter worse.

But unlike the RobinHood generation, no one with any real experience of markets believes in double or triple baggers. We know markets are based on realities, sound analysis and preparation. We also know that markets are about information – and that opportunities, where one person spots something everyone else has missed, is extremely rare – unless the logic of markets has been undone.

Some other forces have been at work here.

As GameStop reached the top and tumbled, retail investors cried foul as RobinHood and other sites suddenly stopped them trading. RobinHood found it had to pay $3 billion in additional margin calls to the clearing houses. It had to raise new capital to cover its positions as the DTCC closed in on its operations. Retail investors found themselves trapped in illiquid positions.

The market remains what it always has been – seriously loaded against the unprepared retail investor. They are furious with RobinHood.

The lesson? There is no such thing as a free trading app.

The lesson? There is no such thing as a free trading app. Firms like RobinHood make their money selling their orders to large firms like Citadel Securities to execute their stock and option orders. Interestingly, Citadel was also the firm that bailed out the Melvin Capital hedge fund, after GameStop shorts nearly sunk it. Some estimates suggest that 27% of the US Stock market order flow now goes through Citadel, as well as 46% of retail volume. It made $1 billion in Q4 2020 from its execution platform.

What the madness of GameStop illustrates is the danger of gamifying stock investments and the way Wall Street works. Zero commission sites have made millions for their operators, but they exist to channel orders to firms like Citadel – which has made billions in effectively risk-free profits, by executing retail orders. It encouraged the retail boom by allowing RobinHood and others to offer commission-free trading apps to unprepared retail investors.

Who goes to jail? No one I expect...

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