Some public offerings are hits. Others are flops. Then there are those that don’t make a huge splash at first but go on to post impressive aftermarket gains.
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Google is a good example. After cutting its price range to go public in 2004, the company saw just a modest early bump. Today it’s worth 50 times its initial public value. And Facebook, which actually fell following its debut, is now worth over 7 times its initial valuation.
In the current crop of recently public tech companies, there probably isn’t another Google in the making. However, a handful of companies have posted huge gains in aftermarket trading, some adding tens of billions to their valuations. We look at some of the biggest recent post-IPO winners below.
The big data analytics company went public in September through a direct listing. It opened for trading at $10 a share, valuing the company at around $22 billion.
More recently, Palantir has been trading above $18 a share. That gives the company a market capitalization around $35 billion.
A better-than-expected third-quarter earnings report helped boost shares. The Denver-headquartered company’s revenue increased by more than 50 percent year over year. Palantir also raised its revenue and adjusted income forecasts for 2020.
The company also boasted to investors that its largest customers are accounting for a smaller portion of overall sales. Palantir’s business model relies on large contracts with deep-pocketed clients—the U.S. government in particular—so expanding the customer base is seen as decreasing risk.
When Unity went public roughly two months ago, its debut was a pretty big smash by most metrics. The video game software company hit the market at a valuation of nearly $14 billion and saw shares rocket over 30 percent in first-day trading.
Apparently, however, Unity had room to soar higher. Today, the San Francisco-based company is valued at over $31 billion. Shares have more than doubled from the IPO price.
There’s no obvious single factor behind the post-IPO surge. However, it ought to help that gaming shares in general are on a tear—as evidenced by one gaming-focused ETF that’s up 70 percent since last year. And Unity certainly offers plenty of growth, with recent Q3 revenue up over 50 percent year over year, albeit with a wider net loss.
When Peloton went public in September 2019, its IPO didn’t go as well as hoped. The New York-based maker of connected fitness equipment and classes opened with a public valuation of just over $8 billion. But shares tanked on opening day—an ominous sign for an aspiring market newcomer.
Fast-forward a few quarters, and the stationary bike titan is riding high. At more than $100 a share, it’s valued at just over $30 billion. Revenue has soared in 2020, as consumers seek ways to stay fit at home amid the pandemic.
Although Peloton stock is off from its highs last month, as investors cautiously eye a post-pandemic future, it’s still an impressive run. There’s also optimism that even when people can return to the gym, they’ll still opt for the ease of a home workout.
Snowflake really didn’t need a post-offering boost. The cloud data-warehousing company already set a software sector record with its September IPO, debuting at an initial valuation of $33 billion.
But public investors were convinced that wasn’t enough. After a big surge in first-day trading, San Mateo, California-based Snowflake closed with a market cap of $70 billion. Since then, the Silicon Valley company has expanded modestly on those gains, with a recent public valuation approaching $72 billion.
Investors will likely reevaluate their bets on Dec. 2, when Snowflake is slated to report its quarterly earnings and guidance for the first time as a public company. No one’s expecting profits yet, but the company will need to show customer growth in line with its lofty share price.
One can slice and dice the financials from these top-performing recently minted public companies, but it’s unlikely to offer a clear explanation for their rising valuations. They all lose money. They have also all been posting strong revenue growth, helping keep share prices buoyant for the time being.
Typically when growth stops, ultra-high valuations follow suit. But right now, with yields on so-called safe investments historically low, investors are chasing growth and handsomely rewarding those who provide it.
Illustration: Dom Guzman