Duolingo’s IPO

How to trade Duolingo’s IPO

Duolingo is a US EdTech (education technology) company that is headquartered in Pittsburgh, Pennsylvania. It operates a language-learning platform/app for web and mobile, as well as a proficiency assessment exam, in 40 different languages. The company has announced that an initial public offering (IPO) will be carried out in the second half of 2021, so read on to discover how to get involved in Duolingo’s IPO and trade on newly listed shares.

FCA regulated

Protected up to £85,000*

LSE listed

28 July

Duolingo's IPO date

$3.4bn+

Duolingo's valuation

$85-95

Expected share price

When is Duolingo’s IPO date?

The company's IPO is expected to take place on 28 July 2021. The company is planning to list under the ticker ‘DUOL’ on the Nasdaq exchange in New York, which is known for its heavy weighting of technology companies.

Duolingo’s IPO may come at a profitable time, as data from investment bank Renaissance Capital reported that the recent second quarter of 2021 was the busiest quarter for IPOs since 2000. On average, IPOs saw returns of 34% between April and July.

Browse our upcoming IPOs hubpage for more to watch this year >

What is Duolingo’s valuation and share price?

The company aims to have a valuation of around $3.4bn in total, by offering around 5.1 million shares that will be priced between $85 and $95 apiece.

Duolingo was last valued at approximately $2.4bn in November 2020. This came after the company earned $35m in funding from a number of private equity firms, bringing its total funding to over $180m so far.

In its S-1 filing, Duolingo announced a placeholder $100m figure for the funds that it hoped to raise in the upcoming IPO; however, this has since been overridden by a $424m figure in gross proceeds at its current range. The IPO is backed by private equity and venture capital firms such as Durable Capital Partners, General Atlantic and CapitalG, which is a subsidiary of Alphabet (Google).

How to trade on Duolingo’s IPO

1. Register

Follow our simple registration process and deposit funds to get started trading in the stock market.

2. Pick your trading method

Spread betting is our most popular product and it is tax-free in the UK**, whereas CFDs are available globally but may come with additional costs.

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3. Decide on a trading strategy

If you think that the value of the asset will rise, you can go long and buy, or if you think that the value will fall, you can go short and sell. Please note that some trading restrictions may apply on initial trading.

4. Apply risk-management tools

The stock market can be volatile, so it is wise to protect your positions using controls such as stop-loss orders.

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How are Duolingo’s financials pre-IPO?

Duolingo appears to be a company that has thrived since the Covid-19 crisis began, as the company reported a 129% increase in revenue growth, from $70.8m in 2019 to $161.7m in 2020. In the first quarter of 2021, it also reported a 97% growth year-on-year. However, it reported a significantly larger net loss of $13.5m, up from $2.2m in 2020.

In 2016, Duolingo achieved a mere $1m in revenue, which is a significant contrast to current figures. The company discussed having an IPO in 2017 but put this on hold, reviving the discussion at the start of 2020 after the start-up reached unicorn status in December 2019 with a $1.5bn valuation.

It is worth noting that 72% of Duolingo’s revenue comes from its premium service, ‘Duolingo Plus’, which charges members monthly fees on a subscription basis. This unlocks additional features on the app and allows users to take language proficiency tests. The company also offers a basic cost-free service.

Why may investors be interested in Duolingo’s IPO?

The app has more than 500m downloads and is the top-grossing app in the education category on both the Apple App Store and Google Play Store.

Intelligence platform HolonIQ predicts that the EdTech sector is a fast growing segment and may grow from $12bn in 2019 to $47bn in 2025, making Duolingo a possible promising growth stock.

Duolingo uses artificial intelligence (AI) technologies to build its platform, which is a very innovative trend that investors are paying attention to.

Are there any risks of trading on Duolingo?

Duolingo has acknowledged that Apple’s “Translate” tool may be a risk in terms of competition. The iOS app was launched in 2020 and allows users to translate text or speech between several languages for free.

Its “freemium” business model may not be sustainable as it is reliant on subscriptions, which act as the primary driver of revenue. Less than 3% of users make up 72% of Duolingo’s revenue.

Investors may worry that its 129% revenue growth is temporary and won’t continue in the long-term, which could spiral into losses.

Who are Duolingo’s competitors?

Duolingo has a number of competitors but the majority aren’t publicly available to trade. Rival companies such as Babbel, Lingvist, Memrise and Busuu are all privately held, which may give Duolingo an edge over its competitors. It will be one of the first language-learning companies to go public on the stock market, apart from Rosetta Stone, which is listed on the New York Stock Exchange, and Kahoot is listed in Oslo. Babbel is also reportedly in talks to complete its own IPO at some point in 2021 after raising funding in March. It is worthwhile keeping an eye on stock market news in case there are major developments in this process.

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Can I trade on Duolingo shares?

Once Duolingo’s IPO has taken place and its stock is listed on our platform, you will be able to speculate on its price movements. Choose between spread bets or CFDs to get started.

Who are the underwriters for Duolingo’s IPO?

Goldman Sachs and Allen & Company are reported to be working together as the main underwriters for the IPO, with back-up from Evercore ISI and Barclays. Allen & Company is particularly known for its collaboration with technology and web-based companies.

Are there other EdTech companies having an IPO?

The IPO market is becoming increasingly busy and companies from all sorts of sectors, including education technology, are registering to go public. Check out our article on upcoming IPOs to find other potential stocks to watch.

Will the Duolingo IPO be successful?

We can never guarantee that an IPO will be successful as there are many factors that can affect the process, so traders should take caution when speculating on a brand-new stock. Read our risk-management guide to find out how to counteract potential volatility and price drops in the stock market.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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