Q3 2021 Investments Results
The growth of pre-IPOs and IPOs against a weak stock market
The return of U.S. stock market indices in Q3 2021
The stock market grew weaker amid the high inflation and investors’ concerns about the tightening monetary policy by the Fed, the spread of a new coronavirus strain, pressure from Chinese regulators and property developer Evergrande’s problems. The S&P 500 broad market index and the Nasdaq technology index were up slightly, while the Dow Jones Industrial Average was negative. September was the worst month since March 2020, with the S&P 500 index down 5%, with the financial and industrial sectors performing worst.
Despite stock market volatility, the number of new placements and deals in the private market remains at previous record highs. Many companies, waiting for a change in the monetary policy, attempt to enter the market before a liquidity squeeze.
IPO
The past quarter was the most productive in terms of public offerings than any other third quarter to date. 82 companies had a traditional IPO and raised $27 billion. Still, this was 33% less than than the amount raised in 99 offerings in the second quarter. The number of companies that went public through the SPAC route rose 38% to 88. Their average annual return is now 7.7%, an indicator that was negative in August.
In the third quarter of 2021, we participated in six IPOs. This includes Toast, a restaurant management platform, and the much anticipated placement of fintech Robinhood, which we also offered at the pre-IPO stage. Both investments are now on the upside, at 33% and 10% respectively. Definitive Healthcare, a leading provider of data and intelligence on hospitals, physicians and other healthcare providers, shows +60% return.
According to the results at the end of Q3, the average current return on IPOs excluding commissions is +10.4%.
Pre-IPO
Venture funding remains at record highs. Investors poured $79.6 billion in U.S. private companies, the second-largest quarter by volume of investments to date, after Q2 2021 when investments amounted to $80 billion. Traditionally, most of the capital was channeled to fund late-stage investment rounds.
The largest investments were raised by electric car manufacturer Rivian ($2.5 billion), analytics platform Databricks ($1.6 billion), and neobank Chime ($1.1 billion).
Companies in our portfolio also raise funding and become public. Ginkgo Bioworks, a leader in synthetic biology, went public via SPAC. Paragon 28 and Udemy filed with the SEC and plan to go public in the near future.
Algolia increased its valuation to $2.25 billion by raising a $150 million Series D round. KeepTruckin had a new round that raised $190 million, bringing its valuation to $2.3 billion. As of September 30, its stock price is $7.2. During the July to September period, the securities grew 31%, and the company's return throughout this time is +57%.
We decided to close investment in Virgin Hyperloop, which was introduced on the platform in 2018. The company is working on a superfast vacuum train service. According to our sources, Virgin Hyperloop is restructuring its equity capital and prepares to raise new funding. This could significantly reduce the cost of capital for current minority shareholders. As a result, the loss on this position was 11.5%.
You can see the results of all pre-IPO investments on a single page, in the Pre‑IPO Results section on the UT website.
Dizraptor, our app for investments in private companies, is coming soon. It is as straightforward and user-friendly as the UT app. Deals will be made via an SPV, which is a transparent shareholding structure protected by US law.
New investment ideas
In the last quarter, we introduced new investment ideas on the platform. For example, Outreach, a salesforce automation software developer, Delphix, which accelerates digital transformation at companies, and the MasterClass platform, where you can learn from celebrities.