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The IPO market is facing a critical turning point

The US IPO market has been unstoppable for almost a year and has been hit by a surge in speed.

The share of fast-growing companies is losing more and more investor support. Many newly listed companies whose stock prices have skyrocketed after going public are below IPO prices. At least three companies have postponed their IPOs for fear of entering a volatile stock market after the S & P 500 began the week with a biggest three-day plunge in nearly seven months.

Some investors and bankers believe next week could be a turning point. Oatly Group AB, a Swedish auto milk maker backed by celebrities, and Squarespace Inc, a software company, where the stock market has settled down. If the public offering goes well, they say they can increase their credibility with the IPO. If volatility continues and those products are scattered or postponed, the IPO market could be braked.

Eddie Moroi, co-head of Morgan Stanley’s Americas equity and capital markets, said:..

“Ultimately, we want market stability and trading to be executed and maintained. Investors who make money with the latest trading will always be useful for the next trading. . “

For the past 11 months, that has been the case. The IPO market, which raised a record $ 168 billion in 2020, has already raised a staggering $ 158 billion in 2021, according to Datalogic data up to Thursday. However, the trend has changed recently as inflation concerns have become the focus and investors are looking for shelter outside of growing companies.

Honest stock Co., Ltd.

The consumer goods business, co-founded by Jessica Alba, grew 44% to $ 23 on the first day of trading earlier this month. Shares closed at $ 14.91 on Thursday, below the IPO price of $ 16.Fundraised Biggest IPO of the Year, South Korean E-Commerce Giant Coupang Co., Ltd.

It is currently trading below the IPO price.So does dating app operator Bumble. Co., Ltd.

This week’s inventory is down 27%.

Cryptocurrency Exchange Coinbase Global Co., Ltd.

This year, it was released through direct listing. This is an increasingly popular way for businesses to go public, bypassing the traditional IPO process. There is no IPO price for a direct listing, but Coinbase trades below where it was listed at the end of the first day on the market.

The cryptocurrency exchange Coinbase went public in April when it was listed directly.


Photo:

Richard B. Levine / Zuma Press

According to the latest data available from Dealogic, this year’s US-listed IPO rose 2.1% from its IPO price until Thursday’s closing price, except for non-traditional methods such as direct listings and special-purpose acquisition companies. By comparison, the S & P 500 rose 9.5% this year until Thursday’s closing price. The Nasdaq Composite is known for stacking with growth companies similar to those considering listing, rising only 1.8% from this year to Thursday. Both indexes recorded a surge on Friday.

Rick Delos Reyes, Co-Portfolio Manager for the T. Low Price Multi-Strategy Total Return Fund, said: “It’s a tough market right now, and very fast-growing companies aren’t favored.”

A healthy IPO market is the trading app Robinhood Markets Inc. And grocery delivery company Instacart Inc. And so on, it’s important to pave the way for a big way to debut later this year. SPAC is also a big part of the big picture. Companies over $ 100 billion are also obliged to merge with private companies and go public. Bankers and fund managers say the task is much more difficult in markets where investors are wary of participating in transactions.

Thirteen SPACs announced a merger in May, with only one trading above the IPO price earlier this week. Many fund managers who have invested heavily in tech companies have seen their portfolios plummet in recent weeks and are known as IPOs and PIPEs that may be important to complete the SPAC merger. Missing the opportunity for private investment in public equity.

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For a fast-growing market, this was a quick cooldown. Towards 2021, the US IPO market was on fire, and companies rushed to launch an IPO after years of avoiding the open market. They were immediately rewarded. The average pop on the first day of the IPO last year was strong at 17%, and many continued to skyrocket from there.

Squarespace and Oatly are preparing next week to test investors’ willingness to open up large, well-known brands. Backed by celebrities such as Oprah Winfrey and Natalie Portman, and the Blackstone Group, a private-equity Jaguar note. Co., Ltd.

Leading investor Verlinvest has raised about $ 1.35 billion in its IPO and is targeting a valuation of about $ 10 billion.

Squarespace, which plans to go public directly, had a corporate value of $ 10 billion in its March funding round.

According to people familiar with the matter, Oatly will open trading on Thursday, but Squarespace will be listed on Wednesday. Investors will undergo IPO market health checks in the form of these debuts, but Tim Credon, director of global equity research at Newberger Berman, said inflation is unlikely to be resolved so quickly. Said.

“The problem everyone is trying to get is inflation, and what are we willing to pay for future growth,” Cledon said.

Write to Corrie Driebusch (corrie.driebusch@wsj.com)

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The IPO market is facing a critical turning point

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