Pre-market shares: IPOs were hot. Now investors dump them

But after that, the shine often came off. Of the U.S. IPOs that raised more than $ 1 billion in 2021, 20 are trading below their IPO price, while only 16 are above, according to Dealogic data provided to Before. the Bell this week.

“After that day one jump, on average this year IPOs have underperformed the market,” Jay Ritter, a University of Florida professor who studies IPOs, told me.

See here: At Tuesday’s close, Bumble was trading 22% below its IPO price. Oatly was 54% lower.

Renaissance IPO exchange-traded fund, which tracks newly listed companies in the United States, is down 11% year-to-date. The S&P 500 jumped 27% over the same period.

Which give? Ritter thinks the spread has a lot to do with Wall Street’s very high expectations.

“I would attribute this mainly to the high valuations that a lot of these companies started out,” he said. “When you start with a really high price-to-sales ratio, a business has to really perform so as not to disappoint investors.”

When Oatly went public, it was valued at $ 10 billion although it was not yet profitable. Bumble, also in deficit, has achieved a valuation of over $ 7 billion.

That in itself is not unusual, Ritter said. The “vast majority of companies that go public have negative profits,” he noted.

Traders are betting that companies will become the next Amazon (AMZN), which warned of “substantial operating losses for the foreseeable future” when it went public in 1997. The internet giant now posts billions of dollars in profits every quarter.

But as the specter of an interest rate hike in 2022 looms, investors are reassessing their commitment to riskier assets, forcing them to rethink some earlier IPO purchases.

Not everyone takes a hit. Actions of electric car maker Rivian, which only started producing and delivering vehicles in September, is up 32% from its listing price, for example. The company is now worth nearly $ 93 billion, or more than Ford (F) and General Motors (DG).

Chipmaker GlobalFoundries, which went public in October, is 39% higher.

Looking ahead: According to Aloke Gupte, JPMorgan’s co-head of equity capital markets for Europe, Middle East and Africa, the poor performance of many IPOs over time should not hold back the request new quotes in 2022.

“I don’t see anything structurally different in 2022,” Gupte told me.

He said that even if the stock markets retreat, companies will still be keen to raise funds to keep growing, and those with a strong case for topics like digitization will be successful in raising a lot of capital.

“Liquidity is always going to be flooded,” he said.

Bottom line: U.S. companies raised $ 118 billion in 2021, the most on record, according to data collected by Ritter from the University of Florida. Investors could be more selective about which companies they support next year as rates rise, Gupte said. But the setbacks observed in 2021 should not frighten them.

Omicron plays with the economic recovery

Thousands of canceled flights. Plans to return to the office put aside. College football games and Broadway shows have been canceled. shuttered Apple (AAPL) stores in New York.
The Covid is again shake up the US economy, reports my CNN Business colleague Matt Egan.

The disruption is different this time around, however. Vaccines and boosters are widely available, Omicron’s symptoms appear to be milder than with previous variants, and government officials pledge not to force a shutdown on the economy.

Yet the staggering speed with which Omicron is spreading – and the dearth of available tests – nonetheless poses serious problems for families and businesses tired of Covid.

“This is definitely a setback for the recovery,” said Kathryn Wylde, president and CEO of Partnership for New York City, an influential business group.

With Covid cases skyrocketing, many companies have told office workers to stay home, dashing hopes of bosses and local businesses to reunite with their employees in person in January.

“It’s all up in the air again,” said Wylde, who blamed a combination of Omicron and confusion over New York City’s vaccine mandate for private sector workers. “The longer this goes on, the harder it will be to get people back to the office.”

The chaos is most glaring at airports. Another 3,000 flights were canceled around the world on Tuesday and another 2,000 have been reduced so far today. The problems are due in part to a spike in cases among crew members which is putting additional pressure on a labor shortage in the industry.

In a bid to ease pressure on the economy, the U.S. Centers for Disease Control and Prevention on Monday shortened the recommended time frames for people to self-isolate after testing positive for Covid-19 if they have no symptoms. But the anguish grows.

“The whole world is tired of this thing. It leads to international frustration with governments that have not been able to control it,” said David Kelly, chief global strategist at JPMorgan Funds. “It is a virus which is smarter than our political systems.”

Gasoline at $ 4 could arrive in the United States by Memorial Day

Pain at the pump may get worse before it gets better.

It is according to a new GasBuddy forecast which predicts the national average will rise to $ 3.41 per gallon in 2022, from $ 3.02 per gallon this year.

Such a move would undo some of the recent relief American drivers have received as gasoline prices retreat from seven-year highs.

The national average at the pump fell to $ 3.28 a gallon on Wednesday, according to AAA. That’s down 14 cents from the November 8 high of $ 3.42.

Looking ahead: GasBuddy’s forecast calls for pump prices nationwide to peak at a monthly average of $ 3.79 in May.

“We could see a national average that flirts with, or in the worst case, potentially exceeds $ 4 a gallon,” said Patrick De Haan, head of petroleum analysis at GasBuddy, an app that tracks fuel prices, demand and outages.

That would amplify the inflationary pressures that have hit American families struggling with the biggest price hikes in nearly 40 years. And that would add to the White House’s political headaches, going against the government’s forecasts.

The U.S. Energy Information Administration said earlier this month that it expects the national average to drop to $ 3.01 per gallon in January and to $ 2.88 in 2022.

Following

Pending US home sales for November arrive at 10 a.m. ET. The latest US crude inventory data follows at 10:30 a.m. ET.

Coming tomorrow: UI claims from last week.


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