As we approach a new chapter in the pandemic with vaccines rolling out in many countries, we reflect on which industries have been of interest since the crisis spread across the globe last year.
During the past year, there has been a noticeable uptick in IPO activity surrounding a variety of industries such as real estate, tech, pharmaceuticals and biotech, and areas related to e-commerce such as transportation and storage infrastructure. Overall, the value of IPOs increased globally by 64% in 2020 and saw a significant spike in demand in Q3 and Q4 in 2020, based on data from Dealogic.
Real estate is often considered a “safe” investment, especially during hard times. This was certainly the case in 2020, including in mainland China. New regulations were announced in China in late 2020, however, that required banks to limit real estate lending. These regulations came in the wake of the widely reported collapse of Danke, a rental management company that overstretched its credit line, leading to a spate of evictions and angry landlords and tenants last year.
Tech companies are especially well suited for working remotely and can have low barriers to entry. The year 2020 saw massive growth in food delivery apps such as DoorDash, which went public in December 2020 with one of the biggest IPOs that year. Last year also saw major mergers and acquisitions in the tech sector, such as Salesforce’s purchase of Slack, an online communication application, for USD 27.7 billion. Still, issues can arise from investing in technology. These issues can be undisclosed security threats, issues with personnel, or a lack of infrastructure. Security issues related to Zoom are just one of the many issues businesses have had to face when investing in tech.
During a pandemic it also makes sense that there would be increased investor interest in pharmaceutical and biotech companies. Yet, after the Theranos fraud scandal, investors have been especially keen to do their due diligence on biotech companies, including in the United States. More recent examples in biotech fraud have been COVID-19 testing scams that proliferated in 2020. Beyond understanding the underlying technology, knowing who is behind the technology may also be critical to understanding an investment’s feasibility.
Finally, as people have spent more time at home due to social distancing measures, there is a natural tendency to consider investment in e-commerce. After all, Jack Ma’s e-commerce empire Alibaba was partly built during 2002–2003 SARS outbreak in mainland China when consumers considered alternatives to risking shopping in crowds. E-commerce is a multifaceted industry that includes not only a slick website, but also the storage warehouses and transportation necessary to ship the purchased goods. Understanding an e-commerce provider’s supply chain, level of compliance, and the individuals behind the investment are often a necessary part of due diligence.
Though we are seeing signs of the world reopening with the distribution of vaccines, these investment trends will likely not go away. According to Dealogic, the value of technology, healthcare, telecoms, and transportation mergers and acquisitions have all seen fairly large growth so far in 2021 year-on-year. Global IPOs have generally also seen a massive bump in the first quarter of 2021 compared with the last quarter of 2020. These sectors appear to have an enduring impact on our lives, and so will likely continue to be the focus of investors worldwide.