Investors’ appetite for IPOs, seemingly insatiable earlier this year, has shrunk after the share prices of several newly-public companies quickly sank below their offering price.
Honest Co. entered the market at $16, shot up to $23 on its first trading day, but sagged to $14.90 last week before closing 14 May at $15.97. Dating app Bumble launched at $43 and closed out last week at $42.82.
Perhaps the most disappointing flop has been Coinbase, the cryptocurrency exchange, which is now trading around 25 percent lower than its first-day high.
IPOs are now trading an average of 2.4 percent above their launch price, data firm Idealogic notes, compared to the S&P 500’s 9-percent rise this year.
At least three companies poised to offer their first round of stocks postponed their issues after U.S. stock markets suffered their worst dive in seven months during the first three days of last week, the Wall Street Journal has reported.
“You had this flood of IPOs and SPACs and there was a period where you could do no wrong,” Rick de los Reyes, portfolio manager at T. Rowe Price, told the WSJ.
“It’s a really tough market now with really high-growth companies out of favor,” he said.
This week is crucial, some analysts have said: IPOs are scheduled for Squarespace on Wednesday and celebrity-endorsed Oatley AB, which hopes to raise $1.35 billion out of the gate and climb to $10 billion in valuation on Thursday. If those launch well, confidence may return to the IPO market. If they stumble, players may take that as an omen.
IPOs raised a record-breaking $168 billion in 2020 and have raked in $158 billion already this year, according to Idealogic.
TRENDPOST: We note this article to illustrate the general pull-back across speculative sectors. In addition, the sudden easing of COVID dictates and the reopening of the economy are being pushed by politicians because they are finally understanding the overall economy is still showing weakness… and their tax revenue stream is drying up.
Walmart U.S. CEO John Furner said on an earnings call today that compared to a year ago, there were some 30 percent more discounts offered to shoppers in the first quarter of this year. And, to keep the business coming, they will continue to offer discounts.
We note this to further illustrate that the economy is not as strong as the Fed, Washington, and The Street are saying it is. When demand is high and money is plentiful, discount offers decline instead of rising.
