Startups

What 2021’s IPO pops tell us about future flotations and SPACs

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Image Credits: Nigel Sussman (opens in a new window)

News that the SenseTime IPO is on hold leaves the stock market with just one major tech listing on the horizon: Samsara’s public debut, which is currently anticipated to price Tuesday and trade Wednesday. That makes it the perfect moment to sit back and chat through a few of the year’s biggest offerings and how they performed post-debut.


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Two things are on my mind. First, what happened to some of the most famous IPO pops from the last year? With rising retail trading around the world thanks to companies like Robinhood and WeBull, some recent tech offerings have had simply massive early trading sessions. Did those initial gains persist? Or did they evaporate, leaving the IPO mispricing conversation somewhat overblown?

And, second, what happened to the handful of SPACs that we felt made some reasonable sense before their combination was completed? How is Latch doing? And SoFi?

Let’s talk about public offerings now that the IPO season is essentially behind us.

So, what about those insane IPO pops?

If you turn the clock back to one year ago, DoorDash and C3.ai had just gone public, and both racked up simply excellent early returns. As TechCrunch noted on December 9, 2020:

Haters gonna hate, IPOs gonna pop. That’s the story today as richly valued DoorDash and C3.ai, two American technology unicorns, saw their values skyrocket after they began trading today.

DoorDash shares are up just under 83% to $186.51. The company priced its IPO at $102 per share last night, ahead of its raised IPO range of $90 to $95 per share. … [S]hares of C3.ai are up an even sharper 151% to $105.58, after pricing at $42 per share earlier today.

The discourse at the time was that those IPOs were bad in that they were priced incorrectly. That, essentially, bankers had sold their IPO share too cheaply, effectively rewarding their own client base while undercutting the fundraising results of both DoorDash and C3. Well, how have things gone since?

Here’s the story as of early this morning:

  • DoorDash is worth $156.00 in pre-market trading.
  • C3.ai is worth $33.50 in pre-market trading.

More simply, DoorDash has gained around 50% from its IPO price in the last year, while C3 has lost around 20%. What this means is that the company’s first-day pops wound up being just that, and not indicative of the true value of either company. So were their IPOs mispriced? Er, no? If the pair of companies had priced at their early trading peaks, they would both be underwater today, instead of just one!

So extreme were the gains exhibited by DoorDash and C3 that Roblox wound up delaying its IPO, opting instead to raise privately and then direct-list. Here’s a short historical record:

  • Roblox filed to go public on November 19, 2020.
  • The company said it would delay its IPO until 2021.
  • Roblox then delayed its IPO entirely, raised at a $29.5 billion valuation, and direct-listed with a reference price of $45.

How did that all shake out? Today, Roblox is worth just over $65 billion, per Yahoo Finance data, or $115.35 per share in pre-market trading. So what we have here is a company that avoided a traditional IPO, opting instead to get mispriced by its private-market backers instead of, potentially, public investors. All the Roblox IPO shakeup really did was ensure that one collection of already-rich people made more money instead of a different group of already-rich people raking in cash.

Revolutionary.

What matters in the Roblox case is that it appears that no one knows how to price IPOs during chaotic market moments. The very investors that whinge and whine about IPO prices that are lower than first-day trading price levels have not showered themselves in glory when it comes to pricing pre-direct-listing companies.

So let’s talk about Coinbase. Here’s the stuff you need:

  • Coinbase final private price, set in 2018: ~$8 billion
  • Coinbase direct listing reference price: $250 per share
  • How far the company’s share price rose post-listing: $429.54 per share
  • The company’s share price today: $252.00 per share
  • That works out to a $67.0 billion valuation as of pre-market trading today.

This is a bit harder to parse, but it appears that we’re again seeing early exuberance for a recently public tech company get far ahead of its intrinsic value; more simply, Coinbase was likely underpriced in 2018 and was overpriced after it began to trade. In a fit of irony, the company’s reference price wound up being pretty good.

There are other examples. Coupang priced at $35 per share, traded north of $50 during its first day as a public concern, and is worth just $26.75 per share in pre-market trading today. So who got it wrong? In this case, bankers actually helped the company raise at a price it ultimately couldn’t support; who wants to argue that it would have been better for the company to raise at $50 per share, making its post-IPO declines even more painful?

All this is to say, when investors are irked about a stock mispricing, just keep in mind that they are only mad that some other investor lined the hell out of their pockets as a result of years of work by others.

Were there any good SPACs?

I got into a bit of a conversation this weekend regarding SPACs, which is indicative of how fun I am.

Regardless, there have been some alright SPAC deals:

  • Opendoor is worth $15.03 at the open today, up from its $10 per share SPAC value, but far below its 52-week high of $39.24 per share.
  • SoFi is worth a similar $15.05 per share at the open this morning, up from its $10 per share SPAC value, but far below its 52-week high of $28.26.

It’s a somewhat thin list. The Trump Media & Technology Group is still having a great trading run — by that we mean its chosen SPAC is seeing its value soar in anticipation of the impending combination — so we’ll discount it. Nothing under SEC review gets our plaudits.

There were some SPAC deals that we were kinda excited about. The Latch deal seemed to make good sense, but after trading higher, it’s now worth less than $9 per share. Circle’s SPAC deal has yet to complete, even if we thought it looked neat.

Overall, I’d say that SPACs have been utterly successful this year in raising capital for companies that might not have been able to execute traditional IPOs at prices that they desired. Bird is under $9 per share, for example. Grab is under the $7 per share mark, to add more data to our mix. It’s just a big mixed bag of blah.

Our takeaway? SPACs are useful, but hardly a panacea to any IPO issue that we can see.

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