Daily Brief: Bumble Sets The Standard For A Busy Year In IPOs

Daily Brief: Bumble Sets The Standard For A Busy Year In IPOs

about 3 years ago3 mins

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Bumble listed its shares on the stock market on Thursday, and investors used their best opening lines to slide into its good books: the dating app’s shares initially rose 76%.

What does this mean?

Bumble’s shares listed at a higher-than-targeted $43 each, raising the company $2.2 billion in the process and valuing it at $8.2 billion. That led to a windfall for private equity firm Blackstone, which bought a majority stake in Bumble’s parent company at a $3 billion valuation back in 2019.

Bumble stock
Source: Google Finance

Bumble (and subsidiary Badoo) is free to use, so it makes most of its money by selling dreams – or rather, premium features that aim to increase users’ chances of finding a perfect match. And it’s working: Bumble has 2.4 million paying daters who spent a combined $417 million in the first nine months of 2020.

Why should I care?

Zooming in: Investors are ghosting Tinder.

It’s been up and down for Bumble over the past couple of years: the company made a $66 million annual profit in 2019, but suffered a $117 million loss in the first nine months of 2020. Still, investors were keen to buy in, which could’ve been because the company’s price-to-sales ratio – that is, its market capitalization to annual revenue – of 14 times was lower than Tinder-owner Match Group’s 20. In other words, Bumble’s shares might’ve been a bargain…

Bumble financial performance

For markets: IPOs are hot right now.

Bumble’s not the first company to join the stock market this year, but its warm reception might set the tone for other high-profile listings to come. Newly infamous Robinhood, for instance, might be hoping for its own Bumble-esque liftoff, while cryptocurrency exchange Coinbase has opted for a direct listing. In other words, it’ll let investors set its share price directly, making its share price far less likely to shoot up when it debuts.

Keep reading for our next story...

Kellogg's And PepsiCo Reported Earnings

Stapes image

Breakfast magnate Kellogg’s announced weaker-than-expected earnings on Thursday, but at least PepsiCo’s update wasn’t such a soggy mess.

What does this mean?

Kellogg’s quarterly revenue and profit both fell short of investors’ predictions, but the breakfast-focused company hadn’t necessarily done much wrong. Investors might just have seen how fast competing consumer staples companies had been growing and set their expectations too high.

Kellogg’s results

That wasn’t the case for Pepsi, whose North American food brands – which include Lay’s chips and Quaker Oats porridge – actually make up over half its profit. And seeing as there’s been plenty of comfort eating going on throughout the pandemic, last quarter’s earnings came in ahead of investors’ expectations – while its growth came in ahead of arch-nemesis Coca-Cola.

Why should I care?

Zooming in: Don’t write off a fixer-upper.

Kellogg’s might’ve missed the mark, but this kind of stumble in a year when demand for at-home food’s so high isn’t the be-all and end-all. Case in point: Kraft Heinz has been quick to adapt after publicly admitting that two of its major brands – Kraft and Oscar Mayer – weren’t worth as much as it thought. That might be why it announced stronger-than-expected annual results on Thursday, along with plans to sell its underperforming nuts business for $3 billion – pushing its stock up 5%.

Famine to Feast
Source: The Wall Street Journal

The bigger picture: Consumer staples have their off-days too.

Investors make a big deal about how reliable the consumer staples sector is, given that shoppers buy its products no matter how the economy’s doing. And they’re not wrong: hygiene and personal care brands were, unsurprisingly, at the top of people’s shopping lists last year, while packaged food – especially healthy and plant-based products – benefited from pandemic-driven stockpiling. But the reliability of the sector isn’t a given: drinks firms, for example, struggled with collapsing restaurant and bar sales, which might be why their shares have done relatively poorly.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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