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Reuters
- The US market of the initial public offering has been packed with prestigious debuts of all sizes this year.
- However, some of the most widely anticipated launches faltered early in their trading.
- At the heart of the poorest indices are companies' unclear paths towards profitability and an uncertain economic contextaccording to investment analysts and advisors.
- Visit the Markets Insider homepage for more stories.
At first glance, the market of the initial public offering in the United States is boiling.
Filled with great deals and splashy names, the IPO market is incredibly active this year.
From investment banks to foreign investors, multi-million dollar delays and the average investor to the opportunity to own a portion of start-ups that are trying to disrupt their industries.
And the stakes are high. According to Dealogic data, the 80 IPOs recorded so far this year by the US represent the heaviest volume since 2014. According to the firm's analysis, they contributed to nearly 15% of the total volume of IPOs of the last decade.
But under the hood, that's another story. Market volatility absorbed the flop after the flop, wiping out investor wealth and darkening future IPOs.
The disappointing performance in some cases can be attributed to the very quality of the companies entering the market, because of their obscure path to profitability and uncertain macroeconomic conditions, analysts and investment advisers told Market Insider.
"We are witnessing the end of a cycle," Tom Forte, senior research analyst at D.A. Davidson, told Markets Insider on Friday. "At the end of a cycle, companies wishing to go public during the cycle rush to become one, and selectively we find that some investors are willing to bear the losses of today." 39 for tomorrow's earnings. "
Quickly, a glimpse of the notable disappointments of the IPO market: Lyft's first trading month was the second worst of the largest listed IPOs, with a 20.5% drop by Dealogic. Only Facebook's 21% drop in 2012 was worse.
Lyft's biggest rival, Uber, was a disaster in its own right, recording the biggest US dollar loss of any IPO since 1975. Its own prices would have been affected by Lyft's poor stock market performance after its debut.
Erin Gibbs, portfolio manager at S & P Investment Advisory Services, said the two new publicly traded companies would be naturally volatile in times of heightened market volatility.
"I'm more hesitant about the riskier IPO market in the face of growing uncertainty about our own economy," Gibbs said in an email on Friday.
"I think investors tend to forget that the reason a business goes public is because it needs cash, whether it's to pay back equity, to pay a debt or to grow, it has Companies do not go public to make investors richer, thinks we should always be cautious about the hype of any IPO. "
Pinterest, meanwhile, jumped in its debut in April. Equities rose 30% in the first few weeks of trading before collapsing after the first quarterly report.
To be fair, the market has also ushered in many successes this year.
Beyond meat recorded the best first-day performance of all US-listed IPOs, according to Dealogic's account, up 163%. It's also the only time, since the era of e-commerce, that an IPO has a first day yield above 100%, by UBS.
Zoom, which has been dubbed "the profitable technology unicorn," has jumped 38% since its debut in April and hit a record Friday. And Luckin Coffee, a Nasdaq-listed Starbucks competitor based in China, gained 47% on the first day of trading on Friday.
"We do not think the IPO market is a total failure," Doug Clinton, managing partner of Loup Ventures, a New York-based venture capital firm and Minneapolis, said in an email Friday. advanced technology companies.
"Zoom has been a great success, PagerDuty has also performed well, we'll see what Slack does, but it looks like it's going to be worth more than its last private financing."
Others say that there is not much to glean from the few companies whose transaction history is extremely limited.
"The volatility of the markets at the moment and the overall short-term trading make it difficult to forecast short-term movements, especially for issuers trading for a short time, such as Pinterest, Uber and Lyft. ., "Scott Coyle, the co-founder and CEO of ClickIPO, an app that follows the initial public offerings, said Friday in an email.
"In the long run, the market prices of the three companies will be determined by the markets according to their financial performance indicators," he added.
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