People wait in line to buy t-shirts at an online brokerage Robinhood pop-up kiosk along Wall Street after the company’s initial public offering on July 29, 2021, in St. New York.
Spencer Platt | Getty Images News | beautiful pictures
This year’s bull market in tech IPOs has turned bearish.
The recent decline in shares of high-value, high-growth, loss-making businesses has led to an overwhelming sell-off in companies hitting the market in 2021. CNBC identified 55 companies. technology launched in the US this year through an IPO, special purpose company acquisition or direct listing. Only one of them – GlobalFoundries – less than 20% off its high price.
That means the rest is in bear market territory, typically defined as a drop of 20% or more from their peak. Ten of those companies fell at least as much in the last week alone.
Worse still, 23 of them have lost half or more of their value since peaking, including Robin Hood, which has plummeted 74% from its peak in early August, and LegalZoom, has fallen 58% since peaking in July. All prices are as of closing Monday.
Investors who opt for a basket of services hoping to build a diversified portfolio have failed to find any safe havens. NS Renaissance IPO ETF, which tracks shares of publicly traded companies in recent years, has fallen 18% in the past three weeks and is down 26% from a February record. Index of top hold to be Moderna, Uber, Snowflakes and Launch.
In the technology sector, rising inflation and the threat of higher interest rates are prompting companies to require more outside capital to support growth. In investors’ flight to safety, those hardest hit are employees and other insiders at companies that haven’t made it past the post-IPO lockdown period, which typically lasts up to six months. when offered for sale.
Rivian For example, insiders are locked down until mid-2022, leaving them outright to suffer a 35% drop in the electric vehicle maker’s stock since mid-November. Refresh, One Sales force competitor, is down 50% from last month’s high, and insiders there are barred from selling until early next year.
Rivian is still trading above its $78 IPO price, but the recent plunge has dragged Freshworks below its asking price. Of the 10 most valuable tech companies that will list in the US this year, 6 are still well above their IPO price or in the case of a direct listing, their first trade. Coinbase, Didi, UiPath, and Robinhood are four coins that have fallen below their initial price.
Cloud software provider GitLab. The pandemic dragged on, making it just above its IPO. price. GitLab reported better-than-expected revenue for the first quarter as a public company, but that doesn’t seem to matter.
For some new public companies, door locks are not an issue. More than half a dozen US tech companies this year have gone public this year, allowing existing investors to sell immediately rather than adding cash to their balance sheets.
While still used by a handful of venture-backed companies, direct listings have gained significant traction this year. Before 2021, there are only four notable companies – Spotify, Slack, Palantir and Asana – chose that path to reach the mass market.
This year, Roblox, Coinbase, Squarespace, ZipRecruiter, Amplitude and Warby Parker Launched via direct listing. Each company’s stock is down 20% to 50% from their peak, but employees have had the ability to sell their assigned shares on the open market from day one, earning at least some profit from them.
Tech SPACs are also a problem for public investors like IPOs and direct listings. Auto insurance company Metromile, its technology that allows drivers to pay by the mile instead of paying a monthly fee, saw the IPO group’s steepest plunge, down 89% from its February peak, shortly after SPAC Merger Accomplished.
Among other SPAC listings, the neighborhood social network Next door down 47% from November high and online lenders SoFi down 44% in 10 months. Media website BuzzFeed are not included in the data for this story as the company completed its SPAC merger on Monday. But it was a rough start, with stocks fell 11% on opening day.
The re-pricing of the tech market could affect the handful of IPOs left this year and possibly in 2022.
HashiCorp scheduled to go public this week and cloud infrastructure software company for a valuation of about 13 billion dollars, based on its original price range. Those expectations were set, however, last week, before the tech market shut down and investors can now pay more attention to the company’s $22 million loss in the latest quarter, up from $9.3 million a year earlier.
Next week, Samsara, whose technology connects physical products to the cloud, will launch at a valuation of around 11.5 billion dollars, follow it updated prospectus second publication. Samsara’s loss fell to $32.4 million in the most recent quarter from $54.3 million in the same period a year ago.
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