The Rise of IPOs in 2020: Exploring the Connection with TikTok's Growth Strategy

The Rise of IPOs in 2020: Exploring the Connection with TikTok's Growth Strategy

In 2020, the IPO market witnessed a significant surge with many companies going public. Surprisingly, only 25% of these companies ended the day trading lower than their IPO price, while over 25% experienced a substantial increase of more than 50% in their stock value. These statistics highlight the phenomenon known as the "IPO pop," where newly listed companies enjoy a significant boost in their stock prices on the first day of trading.

Out of the 61 IPOs that took place in the US in 2020, the median company experienced a 20% increase in stock value on its first day. This indicates a strong demand from investors to get a piece of the newly listed companies. Institutional investors, in particular, aim to acquire stocks at a lower price to maximize their return on investment. This desire to obtain stocks at a discount often leads to IPOs being priced lower than what the market truly values the company.

The IPO market's performance in 2020 can be analyzed from various perspectives, including the influence of popular social media platforms like TikTok. TikTok, formerly known as musically, has witnessed tremendous growth and success by capitalizing on the entertainment preferences of its user base, primarily teenagers. This sheds light on an essential aspect of launching a successful social media platform – attracting and engaging early adopters, particularly the younger demographic.

Teenagers, who are often creative and have ample free time, play a crucial role in driving the initial growth of a new social media platform. In the United States, teenagers dedicate a significant portion of their time to social media platforms, using them as a means to share their daily lives and connect with others. The key to capturing their attention lies in creating a platform that closely aligns with their interests and offers a participatory design approach.

Participatory design involves involving end-users in the design process from the very beginning. In the case of musical.ly, hundreds of users were connected through WeChat, where they engaged in daily conversations. Seeking feedback from users before writing a single line of code is a critical step in ensuring the success of a product. By focusing on utility initially, platforms like musical.ly attracted a sufficient user base before shifting their attention towards building a vibrant community.

Building a community is similar to governing a nation or managing an economy. Lessons can be learned from economic policies to effectively operate and nurture communities. When starting from scratch, it is akin to discovering new territories. Similar to how people migrated to America with the belief that they too could become wealthy, a growing community requires an influx of new participants. However, it is crucial to maintain decentralization and prevent the concentration of benefits within a select few, as this can hinder progress.