Last year was a big year for initial public offerings, despite the COVID-19 pandemic and the temporary pause it put on public market debuts. But many of those newly public companies have seen their stock prices dip from their levels at the beginning of the year.
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Last year ended with notable startups going public in mega-deals, including Snowflake as the largest software IPO ever, with Snowflake, Airbnb, DoorDash, Unity and Palantir among the largest venture-backed IPOs of the year.
So, now that we’re almost halfway through 2021, and many lockup periods on last year’s IPOs have expired, we thought we’d take a look at how some of last year’s largest public-market debuts have performed so far.
The market’s seen quite a bit of volatility this year, between reports of inflation spooking investors and concerns about the Biden administration’s changes to the capital gains tax. Most recently, the Federal Reserve increased its inflation expectations on Wednesday and indicated that interest rate hikes could come sooner than expected, prompting the Dow Jones Industrial Average to drop another 150 points.
With that in mind, here are the largest venture-backed IPOs of last year and a quick summary of how they’ve performed so far this year.
IPO Price: $120
IPO Valuation: $33.2 billion
First-Day Close: $253.93
Current Stock Price: $238.84
Current Valuation: $70.7 billion
Snowflake’s stock is down around 14 percent since the beginning of 2021 but has more than doubled since its public-market debut. It hit its low point, $188.24, in mid-May, when the market in general was down amid investor concerns about rising inflation. Shares of the cloud computing company have recovered since then, closing at $238.84 on Wednesday, June 16.
IPO Price: $68
IPO Valuation: $47 billion
First-Day Close: $144.71
Current Stock Price: $149.15
Current Valuation: $92 billion
Airbnb’s stock has trended up since it went public in December and is now more than double its IPO price. Its lowest point this year was $132.50 in mid-May when tech stocks in general took a hit during a downturn in the market and Airbnb’s lockup period ended. The lowest price for the vacation rental platform’s stock since it went public was shortly after it debuted — the stock price fell to $124.80 on Dec. 15 after analysts downgraded the stock following its IPO surge.
IPO Price: $102
IPO Valuation: $39 billion
First-Day Close: $189.51
Current Stock Price: $161.46
Current Valuation: $52.6 billion
DoorDash’s IPO followed a banner year for food delivery companies, thanks to stay-at-home orders caused by the COVID-19 pandemic. The company’s stock price is down from its public debut, but has trended upward so far in 2021. The lowest price the company’s stock hit both this year and since it went public in December was $112.99 in mid-May. The company didn’t see its stock price affected too much when its lockup period expired on June 7.
IPO Price: $52
IPO Valuation: $13.7 billion
First-Day Close: $68.35
Current Stock Price: $96.84
Current Valuation: $27 billion
Unity’s stock is down quite a bit since the beginning of 2021, though it’s trended upward since it went public last year. Shares of the video game software developer hit a low of $80.91 in mid-May when tech stocks were hit before recovering. They closed at $96.84 on Wednesday, June 16.
Reference Price: $7.25
Valuation: $22 billion
First-Day Close: $9.73
Current Stock Price: $24.80
Current Valuation: $46.5 billion
Palanatir’s stock price is up nearly 6 percent since the beginning of the year, and has more than doubled since it went public in September 2020. Since the data analytics software company went public through a direct listing, there wasn’t a lockup period expiration that could prompt a stock dip, and the company hasn’t seen its stock significantly fall since it went public. Palantir’s stock closed at $24.80 on Wednesday, June 16.
The tech stock roller coaster
“There’s a few things going on. One, I think the level it traded up to was not realistic in terms of valuation,” he said. “But what you have when a company first IPOs, you have some technical factors that leave the share price at elevated levels for a period of time.”
With Snowflake, for example, there was a lot of demand for the company going into the IPO. Because not all the interested investors could get in on the deal, they bought shares of the company as soon as they could, Healey said. Snowflake closed out its first day of trading 112 percent above its IPO price.
There are also some technical reasons that newly public companies in general could see their stock prices elevated in the first weeks or months after an IPO or direct listing. For an IPO, there’s a lockup period during which early stockholders can’t sell their shares.
And even after the lockup period — typically six months — founders and C-suite executives tend not to sell off their shares because it’s not exactly a vote of confidence in the company when investors see that happen, Healey said.
Many tech stock prices and valuations fell in recent weeks and months before picking back up. Reports of inflation hammered growth stocks — specifically tech stocks — the most.
Snowflake, for example, is down around 14 percent from its price at the beginning of the year and Unity is down nearly 33 percent from its stock price at the start of 2021. Palantir, Airbnb and DoorDash are all up from their early 2021 stock prices, after dipping significantly in May.
Stocks typically trade down after a few events, according to Louis Lehot, a partner at Foley & Lardner’s corporate practice. Usually it’s right after an IPO, if the investment banks didn’t do their job right, if the company didn’t issue a secondary offering after six months of being public, if there are changes in management, or if a company misses expectations or has bad financial results.
“The high valuations are assuming growth numbers and tax rates on the dividends that would pay over time are all being adjusted,” Lehot said. “I think growth expectations are being tempered, and tax rates are going up, and the political environment is that tech is under the microscope and will be regulated with rubber gloves on.”
The DJIA dropped on Wednesday after the Fed raised its inflation expectations up to 3.4 percent from 2.4 percent, and said it expected interest rates to rise by 2023, rather than 2024 as previously stated.
When the market’s down because of concerns about inflation, tech stocks can be hit the hardest. Higher interest rates to control inflation means capital isn’t as cheap, which discourages investors from buying growth stocks that are a bit speculative — such as those for tech companies, according to Healey.
Additionally, the prominence of tech companies in the public markets make them a better gauge of the market overall, according to Lehot.
“When you look at the Fortune 100 20 years ago versus today, it used to be more heavily weighted toward industrial conglomerates like GE. … and you look at it today and it’s heavily weighted to tech,” Lehot said. “So I think tech has just become the barometer of the financial markets.”
Illustration: Dom Guzman
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