Hot IPO Market: Tread Carefully in Hype

The initial public offering (IPO) market overcame a lightning-quick bear market in 2020 to bounce back to levels not seen since the dot-com boom. But there’s still a laundry list of upcoming IPOs for 2021, as a host of companies plan on tapping Wall Street for much-needed capital.

Some of the year’s highlights? Business-to-business database operator ZoomInfo (ZI) helped open the floodgates in June with its $8.2 billion IPO. Cloud infrastructure firm Snowflake (SNOW) hit the markets in September, marking the largest-ever software IPO at a valuation of $33.2 billion – an offering that got the attention of Warren Buffett. And in December, Airbnb (ABNB) pulled off its blockbuster offering, raising $3.7 billion after it priced at $68 per share, well above its expected range.


Big first-day pops have caught investors’ attention. Shares of Airbnb (ABNB) jumped 113% and food-delivery service DoorDash (DASH) rose 86% in their trading debuts late last year. The average first-day return for IPOs in 2020 was nearly 42%, the best day-one showing since 2000, according to Jay Ritter, finance professor at the University of Florida.

Last year’s average annual IPO gain of 75% was the highest in 20 years, according to IPO experts at Renaissance Capital. The 218 IPOs in 2020 were the most since 2014, and IPO momentum will likely continue in 2021 amid expectations for an improving economy and strong market as the COVID-19 vaccine rolls out.

Don’t Buy Into the Hype

For every high-profile IPO that doubles on its first day, there are many newbie stocks that disappoint investors. In fact, the long-term performance of IPOs is underwhelming. About half of IPOs “will produce negative returns” in their first five years as public companies, Ritter says. “My advice now is to stay away from IPOs,” he says.

Consider Airbnb’s December 10 debut. The first trade was at $146 per share, or 115% above its $68 offering price; the stock closed that day at $145. Although headlines touted an eye-popping 113% gain, in­vestors who bought at the opening price suffered a loss of 1%. (The shares recently traded at $150.).


Qualtrics IPO Raises $1.55 Billion, Exceeds Expectations As Stock Jumps

Qualtrics International (XM) raised $1.55 billion with an initial public offering that exceeded elevated expectations and priced above the high end of its estimated range Thursday. The Qualtrics IPO jumped by double digits as trading began.

Qualtrics stock vaulted 51.7% higher, closing at 45.50 on the stock market today.

At the IPO price, Qualtrics will have a market valuation near $15 billion. In November 2018, Qualtrics raised about $400 million with an IPO that valued the company at $4.3 billion. Days later, SAP acquired Qualtrics for $8 billion.


CEO-For-Hire Frank Slootman Turned Snowflake Into Software’s Biggest-Ever IPO

Snowflake, valued at $4 billion when Slootman took over, more than doubled that first day and is up significantly since. It currently boasts a market capitalization of $81 billion on trailing sales of roughly $580 million. His personal net worth, an estimated $2.2 billion, is an extraordinary figure for someone who has never been part of a company in its earliest days.

“I exercise executive prerogative,” he adds. “I don’t have to justify it, I don’t have to convince you. I just have to know that this is what I want to do. And the reason is, CEOs are only there for one reason, and that is they need to win. When you win, nobody can hurt you. And when you lose, nobody can help you.”


The lockup period of Oak Street Health (OSH) expires tomorrow , i.e., February 2, 2021.

Chicago, Illinois-based Oak Street Health is a network of primary care centers for adults on Medicare, and currently operates more than 75 centers across Illinois, Michigan, Ohio, Pennsylvania, Texas, Indiana, North Carolina, Rhode Island, Tennessee, New York and Mississippi.

In the third quarter ended September 30, 2020, the results of which were announced on November 9, 2020, the company reported total revenue of $217.9 million, up 57% year over year.

Oak Street Health made its debut on The Nasdaq Global Select Market on August 6, 2020, offering its shares at a price of $21 each and as mentioned above, the 180 day lockup period expires on February 2.

OSH opened the first day of trading on August 6 at $42.50 and closed at $40.00 that day. The stock has thus far hit a low of $34.98 and a high of $64.39.

OSH closed Monday’s trading at $54.72, up 5.49%. In after hours trading, the stock was further gained 3.05% to $56.39.


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