Businesses flourishing in a COVID normal world

The second half of 2020 saw a notable increase in the number of ASX Initial Public Offerings (IPO) of businesses coming to market from industries that have flourished during the COVID-19 pandemic. Ecommerce, pharmaceuticals, food delivery and cloud technology solutions and technology services have benefited from the increase in consumers accessing products and services from home and that support remote working.

One industry that has experienced an enhanced rate of change due to the human response to the pandemic is the retail industry. It has witnessed accelerated usage of ecommerce platforms as a result of a greater number of consumers avoiding bricks and mortar retail outlets during the crisis.

Indeed, the continued transition to online shopping was one of the biggest consumer trends of 2020, as consumers demonstrated an increased willingness to shop online from the convenience and safety of their homes. According to Dr Jana Bowden, associate professor of marketing and consumer behaviour at Macquarie University, 2020 saw a 75% increase, year on year, in online retail purchases.

The Black Friday retail sales event in November also indicated a huge boost in consumer demand for online purchasing, with Australian consumers making up the fourth largest geographical participant, according to a global e-commerce company Shopify.

The trend towards online shopping was a significant factor in the IPOs in 2020, with eight ecommerce-related businesses listing during the second half of the year.

Australian purchases in the Black Friday sales trended towards beauty products, DIY and home and garden goods which is no surprise as Adore Beauty Group Limited (ASX:ABY) and MyDeal.com.au Limited (ASX:MYD) are two new additions to the ASX during 2020, and provide online platforms for these types of products.

Other notable ASX listings during the year from businesses experiencing growth during the pandemic include Youfoodz Holdings Limited (ASX:YFZ), a producer of ready-made meals and Aussie Broadband Limited (ASX:ABB), an internet provider, which have achieved post listing valuations above company expectations.

These themes are consistent in the global IPO market which is flourishing for companies delivering e-commerce and technology solutions. For example US based Doordash (NYSE:DASH), a technology company supporting food delivery services, achieved a 226% increase in revenue (US$1.92 billion) for the first nine months of 2020, compared to the similar period in 2019, as a result of the increased demand during the pandemic. Doordash ended its first day of trading, post IPO on the New York Stock Exchange on 9 December 2020, with an implied value of (US$60.2 billion).

This article was originally published in the 2021 IPO Watch Australia Report