After a bubble year for initial public offers, 2022 looks like a bust ৷ Shares of many companies that went public last year fell 80% or more from their highs.
Matt Kennedy, a senior strategist at Renaissance Capital, said: “This is the worst sale in the IPO market in over a decade. He cites excessive valuation, rising interest rates and worsening corporate fundamentals for 2021 offers.
As high-growth stocks have been created, the IPO market has largely dried up, with 39 deals raising $ 3.9 billion so far in 2022. This is 90% less than the same 2021 expansion level For all of last year, about 400 companies went public, taking $ 142 billion, Renaissance said. Tally excludes special-purpose acquisition companies.
The wreckage has sparked some bargaining, especially in companies with good growth prospects and tight balance sheets. Some stocks from the 2021 IPO need to be considered
Market (HOOD), and
(WRBY). Kennedy says his firm’s clients are “looking for a list of IPOs over the past five years” looking for opportunities.
Investors can buy through a wide range of recent IPOs
Exchange-traded funds (IPOs), whose shares are at $ 30, have fallen nearly 50% this year. They performed badly enough
27% off, and
Index, down about 18%. The ETF is about 60% off its 2021 peak.
Renaissance ETF has held 100 IPOs in the last three years. Its five largest investments-
Zoom video communication
(ZM) – accounts for about 25% of the funds.
Robinhood is the symbol of the 2021 IPO class because its stock is about 90% off the maximum of $ 85 per share, about $ 10. But the company sits at $ 6.2 billion in cash or 7 7 per share. Its young, often aggressive investor base helped drive meme-stock frenzy in stocks in early 2021, e.g.
AMC Entertainment Holdings
Robinhood has critics, notably
(BRK.A, BRK.B) Vice Chairman Charlie Munger, who says it has encouraged short-term trade by newcomers and turned investment into a game. It also has fans. “It was never just about trading; It was about democratizing access to financial services, “said Devin Ryan, a JMP Securities analyst. He gave the stock an outperform rating with a target price of $ 36.
Ryan sees new products, such as cash-management accounts and expanded cryptocurrency services, increasing revenue later this year.
|Company / Ticker||Recent prices||YTD changes||% Change from IPO price *||Market Price (Car)||2022E EPS||Net cash per share|
|Albird / Bird||$ 4.68||-69.0%||-68.8%||$ 0.7||– 0.42||$ 1.61|
|POSHMARK / POSH||11.02||-35.3||-73.8||0.9||-0.89||7.64|
|Revian Automotive / RIVN||29.61||-71.4||-62.0||26.7||-6.46||16.86|
|Robinhood Markets / HOOD||10.21||-42.5||-73.1||7.9||-1.25||7.17|
|Warby Parker / WRBY||16.44||-64.7||-58.9||1.9||0.09||2.00|
|ETF / Ticker||The largest holdings|
|Renaissance IPO / IPO||$ 30.40||-49.8%||Uber Technologies
Zoom video communication
* Use of reference price for WRBY which has been made public through direct listing. E = guess
Source: Bloomberg; Renaissance Capital; Company report
The first quarter saw Robinhood run into losses, as revenue fell 43%, but cash burn was only $ 62 million. Management based on consistent earnings before interest, taxes, depreciation, and payments, or for the purpose of making Ebitda profits by the end of the year.
Ryan said Robinhood’s platform and customer base could attract interest from potential acquirers, as share prices fall. But he sees the current valuation as “below a level we believe the company can consider.”
(RIVN) Curious because its stock, which peaked at $ 179 after its IPO in November, was as low as $ 19 in early May. That puts a little more than মার্চ 15 billion in net cash on the company’s March 31 balance sheet.
The shares have since risen to about 29. The upstart manufacturer of electric vehicles is losing about $ 5 billion annually as it seeks to increase production of high quality pickup and sport utility vehicles; The output in the first quarter was only 2,553 cars. Profitable can be years away. Rivian says it has enough cash to last until 2025, when it could build more than 350,000 vehicles.
Wells Fargo analyst Colin Langan recently wrote that the company “has low margins for error in all aspects of its business. Its limited production and commercial history have much to look forward to.” Rivian has its equivalent weight rating and লক্ষ্য 24 price target.
A good EV play, recently profiled Baron’sMaybe
(GM), which is financing its conversion to EVs with huge profits from SUVs and pickups powered by internal combustion engines.
Warby Parker is disrupting the U.S. eye care market by offering stylish prescription glasses at as low as $ 95, both online and in 169 retail stores across the country. The stock, about $ 16, is down 60% to 70% from its 2021 high.
Henry Ellenbogen, chief investment officer of Durable Capital Partners, recommended the company. Baron’s Roundtable in early 2022. Ellenbogen sees a significant increase in opportunities for Warby Parker to offer spectacles at about half the price of traditional competitors and to expand its offerings, such as contact lenses and eye examinations. Its overall market share is only 2%.
Ivory Merchant is now operating at a loss and its first-quarter results have fallen short of investors’ expectations. Warby Parker saw revenue growth of 20% to 22% this year, to about $ 655 million.
In an email Baron’s, Ellenbogen says he sees revenue growth accelerating in the mid-range from 10% in the first quarter to 20% later this year. He predicted that margins would be in the top 20% as Warby Parker received “a new glass-manufacturing facility, mature stores and leverage on corporate spending”. The company is valued at $ 1.9 billion – estimated to triple its annual sales by 2022 – and has $ 230 million in cash, or $ 2 shares.
Albards has created a niche with eco-friendly footwear. Its signature wool sneakers, priced at about 100 per pair, are popular in Silicon Valley. The company’s focus on natural materials, including a line of sneakers using eucalyptus leaves, has resonated with socially responsible investors.
The footwear manufacturer went public at $ 15 in November, and the stock reached $ 32 before falling to a recent $ 4.50 after a disappointing first-quarter profit report and a year-on-year decline in revenue guidance. Alberts saw sales increase by 21% to 24% in 2022 to about 340 million. Some analysts do not see profitability until 2024.
Albird’s stock may have plummeted, as the company is now valued at $ 700 million, its net cash is $ 240 million, or $ 1.61 a share, and a real book value of শেয়ার 2.58 per share. After the company’s recent earnings report, Morgan Stanley analyst Alex Stratton wrote, “Although the path to profitability is arguably more cloudy among macro-driven factors, valuations unfairly put Albards in line with distressed retailers.” He sees a favorable risk / reward outlook for the stock, and has an overweight rating and a 12 price target.
Companies such as Poshmark and
(REAL) which offers online marketplaces for second-hand clothing and accessories has hit hard because investors are worried about high marketing costs and future profits. Poshmark, a $ 11 transaction, focuses more on budget than RealReal. Items worth more than 200 200 are estimated to account for about 20% of total merchandise sales.
As of March 31, Poshmark has a better balance sheet with about $ 600 million or $ 7.64 million in net cash. The company trades for about one times annual sales excluding cash. Poshmark is expected to lose শেয়ার 1 per share this year, but cash has risen in the most recent quarter.
Following its latest results, JMP Securities analyst Andrew Boone writes that Poshmark “shows early signs that marketing skills are returning” and that it continues to “upgrade its core services”. He gave it an outperform rate with a target price of $ 20.
Friday’s sell-off, which briefly brings the S&P 500 to bear market, makes these broken IPOs even more valuable. But it can also make their shares more inviting.
Write Andrew Barry at [email protected]