Tech IPOs have been a bad bet in 2021 — all but one are in bear market territory – CNBC
People wait in line for t-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street after the company went public with an IPO earlier in the day on July 29, 2021 in New York City.
Spencer Platt | Getty Images News | Getty Images
This year’s bull market in tech IPOs…….
People wait in line for t-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street after the company went public with an IPO earlier in the day on July 29, 2021 in New York City.
Spencer Platt | Getty Images News | Getty Images
This year’s bull market in tech IPOs has turned into a bear.
The recent downdraft in shares of high-valued, high-growth, money-losing businesses has led to an outsized selloff in companies that hit the market in 2021. CNBC identified 55 tech companies that debuted in the U.S. this year through an IPO, special purpose acquisition company or direct listing. Only one of them — GlobalFoundries — is less than 20% off its high price.
That means the rest are in bear market territory, typically defined as a drop of 20% or more from their peak. Ten of those companies have slid by at least that much in just the last week.
Even worse, 23 of those companies have lost half or more of their value since reaching their highs, including Robinhood, which has plummeted 74% from its top in early August, and LegalZoom, which has plunged 58% since peaking in July. All prices are as of Monday’s close.
Investors choosing a basket of offerings in the hope of building a diversified portfolio haven’t found any safe havens. The Renaissance IPO ETF, which tracks stocks of companies to go public in recent years, has fallen 18% in the past three weeks and is down 26% from its record in February. The index’s top holdings are Moderna, Uber, Snowflake and Zoom.
Across the tech sector, rising inflation and the threat of higher interest rates are battering companies that will require additional outside capital to subsidize growth. In investors’ flight to safety, the people being hit the hardest are employees and other insiders at the companies that haven’t yet made it through their post-IPO lock-up period, which typically lasts until six months after the offering.
