- Of the more than 50 U.S. tech companies that went public this year through an IPO, SPAC or direct listing, only one is less than 20% off its high stock price.
- More than 20 companies in the group have lost at least half their value from their highs.
- Metromile has fallen more than 80% from its peak, while Robinhood is down about 75%.
This year’s bull market has turned into a bear in Tech IPO.
The recent downdraft in stocks of high-valued, high-growth, money-losing businesses has sparked an outsized sell-off in companies that are to market in 2021. Businesshala identified 55 tech companies that debuted in the US this year through IPOs, special purpose acquisition companies or direct listings. Only one of them – GlobalFoundries – is less than 20% off its high price.
This means that the rest are in bear market territory, which is usually defined as a drop of 20% or more from its peak. Ten of these companies have fallen at least that much in the past week alone.
Worse, 23 of those companies have lost half or more of their value since reaching their highs, including Robinhood, which fell 74% from its top in early August, and LegalZoom, which fell by July. Has fallen 58% since peaking in the US. All prices are as of the end of Monday.
Investors choosing a basket of offerings hoping to build a diversified portfolio have found no safe haven. The Renaissance IPO ETF, which tracks stocks of companies set to go public in recent years, has fallen 18% over the past three weeks and is down 26% from its record in February. index top holding There are Moderna, Uber, Snowflake and Zoom.
In the tech sector, the threat of rising inflation and higher interest rates is plaguing companies that will need additional external capital to subsidize growth. In investors’ flight to safety, the hardest-hit people are employees and other insiders at companies that haven’t yet made it through their IPO lock-up period, which typically lasts six months after the offering.
Rivian insiders, for example, are locked in until mid-2022, leaving them fully exposed to the 35% drop in the electric vehicle maker's stock since mid-November. Freshworks, a Salesforce competitor, is down 50% from its last month's high, and insiders there are forbidden to sell until early next year.
Cloud software vendor GitLab, down 35% from its November peak, is also set to hit its lock-up expiration in early 2022. The news got worse for GitLab employees on Monday, when the stock sank an additional 9% in extended trading. GitLab reported better-than-expected revenue in its first quarter as a public company, but that didn't matter.
For some newly public companies, lock-up is not a problem. This year half a dozen US tech companies went public via direct listing, allowing existing investors to sell immediately instead of adding cash to their balance sheets.
While still used by a small minority of venture-backed companies, direct listings gained significant traction this year. Before 2021, only four notable companies -- Spotify, Slack, Palantir and Asana -- had chosen that path for the public market.
This year, Roblox, Coinbase, Squarespace, ZipRecruiter, Amplitude and Warby Parker all debuted through direct listings. Shares of each are down between 20% and 50% from their highs, but employees have the ability to sell their vested stock from day one, at least to capitalize on some of their gains.
Tech SPACs have been equally problematic for public investors as IPOs and direct listings. Auto insurer Metromile, whose technology allows drivers to pay by the mile instead of a monthly fee, has seen the group's sharpest decline in its IPO, up 89% from its high in February shortly after the completion of the SPAC merger. has fallen.
In other SPAC listings, neighborhood social network Nextdoor is down 47% from its November highs, and online lender SoFi is down 44% in 10 months. Media site BuzzFeed was not included in the data for this story as the company completed its SPAC merger on Monday. But it was off to a troubled start, with the stock falling 11% on its opening day.
The revaluation of the tech market could have an impact on the few remaining IPOs this calendar year and possibly in 2022.
Hashicorp is set to go public this week, and the cloud infrastructure software company is targeting a valuation of about $13 billion, based on its initial price range. However, those expectations were set before the tech market rallied last week, and investors can now pay attention to the company's loss of $22 million in the latest quarter, widening from $9.3 million a year ago.
Next week, Samsara, whose technology connects physical products to the cloud, will launch about . ready to begin with the evaluation of $11.5 billion, according to this update brochure Published on Monday. World's loss narrowed to $32.4 million in the most recent quarter, from $54.3 million in the year-ago period.
Watch: Why is BuzzFeed so volatile after SPAC?