The 2021 IPO market could resume the exuberance of 2020
And we go at the races!
Affirm last night valued its IPO above its high range at $ 49 per share, a sign that public markets are still hungry for new listings. Provided that Affirm trades the same as its price today, we could envision an IPO market in 2021 that looks like the rocky results of last year.
This is good news for a multitude of companies looking to follow in the footsteps of the fintech unicorn.
Poshmark price tonight and trades tomorrow. With Qualtrics behind the scenes along with Coinbase, Roblox set on direct list, and Bumble said to drop too, we’re heading into another busy IPO quarter. Affirm’s day one trading results will therefore be of additional importance, although its pricing bodes well for IPOs more generally.
What does Affirm sell? First of all, by its S-1 deposits, it charges merchants a fee for “converting a sale and making a payment”. It sounds like software revenue, but not in the recurring fashion of a SaaS business.
Second, Affirm earns “interest income [from] simple interest loans that we purchase from our original banking partners. And, it offers virtual cards to consumers through its app, which allows it to generate interchange revenue.
We care about all of this because it is important to realize that Affirming is not a software company in the context we usually think of them, namely software as a service, or SaaS.
This matters when we consider how the market values Affirm; The more Affirm is valued in terms of multiple earnings by its new IPO price of $ 49 per share, the more we can assume that the IPO market is bullish.
What are Affirm’s gross margins? An excellent question, and one that is surprisingly difficult to answer. If you read his S-1 repository, you will find that all of his “contributory profit” chatter has been removed. It’s a shame to some extent, as Contribution Profit – and Margin – was Affirm’s shared closest relative to Gross Margin.