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Wall Street has been worried for a few weeks about the mediocre initial post-public offering performance for
Uber Technologies
and
Lyft
would put the kibosh on what was supposed to be a successful year for IPOs.
Uber (ticker: UBER) was released at a price below $ 45 per share and remains a bit below that level; Lyft (LYFT) started at $ 72 a share and is now trading in the low $ 60. Instead of pushing the IPO window, they have barely gone through.
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But it was before the arrival of Mr. Chewy and dogs on the floor of the New York Stock Exchange.
Over the past few days, the IPO market has been renewed. Three very different types of technology companies were released last week – and the market has escalated for all three. It was dizzying, like a 1999 flashback.
We will reach the newcomers in a moment, but I suspect that what we have seen reflects overlapping tendencies, far from the merits of these particular names. It starts with megacap fatigue.
Facebook
(FB),
Alphabet
(GOOGL)
Amazon.com
(AMZN), and
Apple
(AAPL) are subject to close scrutiny by the government. Worse still, while consumers remain loyal to all four, companies are increasingly seen as morally dubious leviathans. Perhaps worse, all their businesses are slowing down.
In her latest report on Internet trends, Mary Meeker detailed the maturation of the Internet last week. At a presentation at the Conference Code in Scottsdale, Ariz., She noted that over 50% of humans were already online. Indeed, global growth in the number of Internet users has only increased by 6% last year, up from 7% in 2017. Smartphones suddenly feel overwhelmed – deliveries have dropped 4% last year. And advertising revenue on major platforms increased by 20% in 2018, compared to 29% previously.
In May, Ross Sandler, an analyst at Barclays, wrote an article titled "It's official – Internet slows down considerably, what to do now?"
The immediate response seems to be the purchase IPO. While Uber and Lyft are at a standstill, many enterprise technology companies have had spectacular debuts, including Zoom Video Communications (ZM) and
PagerDuty
(PD). These corporate-focused brands are less likely to be outraged and to be heard in Congress than Facebook or Google, for example.
Last week's IPO activities started with
CrowdStrike Holdings
(CRWD), a cloud-based security company. At the end of May, CrowdStrike set the expected price range for its IPO at between $ 19 and $ 23 per share; a week later, the company increased the range from $ 28 to $ 30. The IPO was $ 34 – and by the end of Thursday the stock price was $ 68, double the price of the IPO and about three times the original price range. While the stock edged down on Friday, its strong start gives CrowdStrike a market capitalization of $ 13 billion, about 50 times the revenues of fiscal year 2019, making it one of the fastest growing companies in the world. the most valuable security software in the world. It's already ahead of
Symantec
(SYMC), which has 18 times the income.
Then there is
Fiverr International
(FVRR), a small Israeli company that operates a market for digital services. At first it was a place where people could do chores for – you guessed it – $ 5. In 2012, Business Insider highlighted this example: for $ 5, "I'll juggle with torches while saying whatever you want (less than 25 words, please), and I'll send you the video in HD ". Hard to match.
Fiverr dropped the fixed price of $ 5 a few years ago and now lists serious workers looking to perform serious tasks, such as writing speeches or designing logos. But the stupid thing remains.
Here's one that I found: "In exchange for five dollars, I will write you with five names of limericks with the name of your choice." (What rhymes with Zuckerberg?) Variable pricing based on the level of service – basic, standard and premium. We are talking about your best friend here – pay the premium, right?
Fiverr was first to sell for between $ 18 and $ 20 per share; shares priced at $ 21, and closed the first trading day at $ 39.90, a gain of 90%. Not exactly theGlobe.com, an atomic bomb that had a more than 600% pop in a day in 1998, but still surprising. Before a slight decline on Friday, Fiverr's market capitalization reached $ 1.2 billion.
Soft
(CHWY), an online pet food retailer, closed the big week. His shares priced at $ 22 Thursday night, went from an initial range of $ 17 to $ 19. Even after the IPO, the digital company is majority-owned by brick and mortar giant PetSmart.
Chewy and his cartoon mascot, Mr. Chewy, recall a bit of another bubble era debacle, Pets.com and its legendary sock puppet.
Like Pets.com, Chewy is accumulating impressive losses. The company achieved a turnover of 3.5 billion USD in 2018, up 68% from 2017, while losing 267.9 million USD. The big winners are PetSmart, which bought the company from its founder in 2017 for $ 3.35 billion, and the owner of PetSmart's equity, BC Partners. At $ 22, Chewy was already valued at $ 8.7 billion, instantly the largest pet company in the public sector. And then the first transaction reached $ 36, bringing the market capitalization to more than $ 14 billion. By the way, if you go on pets.com today, it will direct you to PetSmart, which offers a separate online store from Chewy. There is no sock puppet anywhere in sight.
The real question is whether one or the other of these robust launches has the power to stay – and if they can spur transactions for the many unicorns still on the sidelines, including Airbnb, WeWork, SpaceX, Palantir and SoFi. This week's Slack direct list will be another test for the IPO market, as we explain on page 13, but bigger names are coming.
You may want to save some of these fivers.
Write to Eric J. Savitz at [email protected]
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