Hot IPOs hang onto gains as investors keep betting on tech

This morning, while checking the latest price for shares of recent IPO Poshmark, I noticed that they were down from their first-day results. The company’s pricing was more than strong, and its first trading results were nearly comical.

After setting a $35 to $39 per-share IPO price range, Poshmark sold shares in its IPO at $42 apiece. Then it opened at $97.50. Such was the exuberance of the stock market regarding the used goods marketplace’s debut.

But today it’s worth a more modest $76.30 — for this piece we’re using all Yahoo Finance data, and all current prices are those from yesterday’s close ahead of the start of today’s trading — which sparked a question: How many recent tech IPOs are also down from their opening price?

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So The Exchange, ever at your service, raced around to collect the data. And what did we find? Most hot tech IPOs have held onto their gains, and many have actually run up the score in the ensuing weeks.

Lemonade is a great example. It first targeted a $23 to $26 per-share IPO price. That rose to $26 to $28 per share, then it priced at $29 per share. It opened at $50.06 per share, closing the day worth $69.41. 

And today? A single Lemonade share will set you back $145.21. The company is now worth $8.22 billion, despite only posting Q3 revenues of $17.8 million, a decline from the year-ago period (for more on why that is, and why it isn’t as bad as you might initially think, read this.)

Analysts anticipate that Lemonade will post revenues of $18.91 million in Q4 2020, again via Yahoo Finance, putting the company on an annualized run rate of 109x. For a business running with net margins of -173.6% in its most recent quarter. And that’s after Lemonade announced a large share sale!

All this is to say that the fiery optimism fueling dazzling IPO debuts has the potential to keep pushing them higher. Which you can view as troubling, if you are a boring index funder like myself; enticing, if you are a founder looking to go public in the near-future; and potentially irksome if you are a VC annoyed when upside leaks to parties other than yourself.

This brings us to our data set. Below, I’ve collated a host of recent IPOs, their opens and their current prices. Only one has shed value.

And then we reexamined eight 2020 offerings that you will recall so we could run the same exercise. The results were not what I expected and indicate a stock market — let alone an IPO market — sufficiently inflated to warrant the whispered moniker of bubble.

Let’s have some fun.

Up, and then up some more

Kicking off with the most recent IPOs, I’ve collected the companies that went public in December and January that we care about. Here’s the list, their open prices and where they were valued before today’s open:

  • Airbnb: Opened at $146, now $161.83.
  • Opened at $100, now $131.38.
  • DoorDash: Opened $182, now $189.46.
  • Poshmark: Opened at $97.50, now $76.30.
  • Affirm: Opened at $90.90, now $106.21.
  • Wish: Opened at $22.75, now $25.85.

Impressive as all hell, right? Airbnb is somehow floating up while is worth more than it was on its IPO day, and even DoorDash has managed net gains from its opening value! Affirm and Wish round out the winners, while Poshmark has the dishonor of having lost some value from its opening trade, leaving it up a mere 82% from its IPO price.

But what if we go back in time a bit?

Here’s another chunk of recent tech IPOs, this set coming entirely from the 2020 timeframe. Again, names we know, comparing their opening price with where they were this morning:

  • Unity: Opened at $75, now worth $147.25.
  • Snowflake: Opened at $245, now worth $281.88.
  • Palantir: Opened at $10, now worth $26.34.
  • Asana: Opened at $27, now worth $39.57.
  • Sumo Logic: Opened at $26.64, now worth $30.52.
  • JFrog: Opened at $71.27, now worth $61.42.
  • Lemonade: Opened at $50.06, now worth $145.21.
  • ZoomInfo: Opened at $40, now worth $47.

JFrog, what are you doing? Palantir is the really bonkers result here, but as it has become a meme stock I mostly want to ignore it. Asana is doing incredibly well, as is Unity. And as we noted at the top, Lemonade is crushing the game.

Which is all a bit worrisome. Surely these companies did not start to add more value in percentage growth terms since going public than they did before, right? After all, larger companies tend to see growth slow in percentage terms, over time. And yet the pricing changes here would have you think that the opposite was going on.

I don’t know what to think of Palantir worth around 44x its expected 2020 revenue result. But it doesn’t scream reasonable. So it’s good time to go public and a weird time to invest for your dinky personal retirement.