Aja McClanahan is a personal finance writer who has a story of getting out of over $120,000 in debt. She's been featured in Yahoo! Finance, MarketWatch, U.S. News and World Report, Kiplinger and has written for publications like Business Insider, Credit Karma, Inc., and many others. Aja writes about investing and personal finance for Wealthsimple. In her spare time, she manages her own investment portfolios for herself, husband, and two kids. Aja double majored in Spanish and Economics and holds a Bachelor of Arts degree from University of Illinois at Urbana-Champaign.
If you are looking for ways to diversify your investment portfolio, there’s no doubt you’ve considered getting in on the “ground floor” on an IPO or initial public offering. This is when a privately-owned company makes its shares available to the general public for sale. Initial public offerings can be exciting for investors that are fans of a company and have always wanted the opportunity to be a part of its success.
Nextdoor is one of many companies that have announced plans for a 2021 IPO. If you are considering investing in the online platform, here’s some information that could help.Get started with Wealthsimple Trade. Sign up today and start building your portfolio.
What is Nextdoor?
Founded in 2008, Nextdoor is an online platform created to connect people within communities—neighbors, businesses, and other stakeholders crowdsource and disseminate information about what’s happening locally. Users are verified and plugged into the correct community by responding to a physical postcard mailed to their physical address.
Most people use the app to give neighbors advice, get help, recommendations, and more.
Nextdoor operates in eleven countries, 270,000 neighborhoods globally, and has recorded 50,000 recommendations for local businesses since its founding. The company intends to differentiate itself from other social media platforms by developing features that focus on the use case of people connecting and working together locally. At present, the company’s income is from sponsored content and advertising partnerships.
What is Nextdoor’s current market cap?
Nextdoor’s market cap was estimated to be about $2.2 billion around 2019. In October, 2020, there were reports that the company would go public with a valuation between $4 billion and $5 billion.
This valuation comes mainly from money raised from various funding partners starting in 2008. As of 2015, the company had not reported any revenues but presently earns money through advertising and sponsored content. It is unknown whether the company has been profitable since it began to earn income.
Here’s more information about the company’s fundraising history and related valuations:
|Date||Shares Issued||Share Price||Amountplatforms Raised||Post Money Valuation|
|Jan 2008||10,100,000||$0.50||$5.1 m||$18.5 million|
|Oct 2011||11,476,446||$0.63||$7.2 m||$30.6 million|
|Jul 2012||7,274,066||$2.56||$18.7 m||$143.3 million|
|Feb 2013||6,795,019||$3.19||$21.7 m||$199.7 million|
|Oct 2013||6,784,477||$8.84||$60 m||$613.9 million|
|Aug 2014||7,604,539||$14.50||$110.3 m||$1.1 billion|
|Aug 2017||2,958,006||$18.59||$55 m||$1.6 billion|
|Sept 2019||8,339,262||$20.39||$170 m||$2.2 billion|
When is the Nextdoor IPO taking place?
Though the rumors have been swirling about a possible 2021 IPO, there’s no confirmed date for Nextdoor’s IPO. The company has not yet filed the required paperwork to start the IPO process.
Though there is no date of when Nextdoor’s IPO could happen, there are some markers to look for that would indicate its IPO is on the horizon:
An investment bank is chosen
The investment bank is responsible for structuring the IPO and getting commitments from buyers before opening day (when stocks are officially for sale on an exchange). These buyers could be institutional investors or high-net-worth individuals.
Appropriate documents are filed
Before going public, a company must file an IPO prospectus, or S-1 prospectus, with the Securities and Exchange Commission (SEC). This information contains financial data and an overview of risk factors investors should consider before buying shares of the company.
The “"roadshow“ begins
In this phase, company management meets with prospective investors to “pitch” the company. Typically, the company’s CFO will be present and field questions from buyers who are likely poised to buy millions of dollars worth of shares.
The price and number of shares are set
The night before the IPO, the investment bank and company executives will have a final meeting to set the IPO price and determine how many shares they will make available. By opening day, the general public will know the price and number of shares available for purchase on the public exchange.
So far, none of this has happened with Nextdoor. If you really want to stay on top of this IPO, watch for the S-1 filing announcement. As a rule of thumb, companies are pretty serious at this point and tend to go public 1 to 2 months after this filing.
Why are people interested in buying Nextdoor shares?
Notoriety does not always indicate profitability. It’s not uncommon for a large company to be around for a long time, serving many customers and turning no profit whatsoever. Many companies’ stock prices can be based on injections from venture partners or selling shares to the public.
And of course, there are plenty of companies that are not profitable for many years but find a revenue model that leads them to profitability. So far, Nextdoor has raised a lot of capital but may not yet be profitable.
As an investor, you’ll have to decide if investing in this type of company is ideal and fits within your individual investing plan. If you are a long-term, value investor, you’d do well to stay away from hype and buzz and focus on the fundamentals of a company.
Ideally, you’d look at their financial data and understand their path to profitability and how it will serve their shareholders. If you can clearly see the company’s vision for growth, it could be a suitable investment for you.
How can I buy shares of Nextdoor?
As you would with any investment, you’d want to read the company prospectus to understand its business model before investing. Once you’ve done your research, the steps to invest in the company are easy:
Find a brokerage firm. Online is ideal. Your account can be opened and funded in just a few days once your personal information is verified.
Place an order for the stock according to your investment objectives: market, limit, stop order, or buy stop order are common orders used to buy shares of stock
Wait for confirmation that your order has been received and completed
Once you’ve placed your order, and you are an official investor in the company, be sure to check in on your investment from time to time. Ensure the company’s core principles and operating philosophies align with your personal conviction and financial goals. If so, you can always increase your position in the company as time passes. If not, you can always sell your shares as needed, too.
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