2019’s Extreme IPOs

Heading into 2019, investors were excited about a number of potential IPOs. The debuts of ridesharing companies Uber and Lyft were among the most touted along with names like Beyond Meat, Slack, and Peloton. Some speculated that Airbnb would launch its IPO in 2019, but it looks like that will take place in 2020 now. There is also the curious case of WeWork which was set to launch this year, but the company pulled its IPO last month after the valuation was cut dramatically.

Looking at the companies that have debuted, we have seen a few huge successes and we have seen disappointments as well. If you look at the table below, we have a list of companies that have debuted this year with the date of the IPO and the return since then. These were the companies I deemed as the most anticipated of this year. All of the returns are based on the offering price and they are calculated through Monday, October 7.

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By far the most successful IPO of the year has been Beyond Meat, the plant-based meat producer. Since debuting in May the stock has gained 480%. The stock shot up immediately and was even higher in July than it is now. The stock was offered at $25, debuted at $46, and peaked at $239.71 in July.

Zoom Video Communications was offered at $36, debuted at $65, and is currently trading near $75. Most of the gain came on the debut, so if an investor wasn’t in on the offering, they have only experienced a modest gain.

Pinterest is one of the more interesting stocks, at least in terms of its chart. The stock jumped from the $24 area to $35 within the first eight trading days, but then it dropped almost as sharply. The stock stabilized toward the end of May and then moved from the $26 area to the $36 area in August, but the stock has dropped right back down below $26 on October 8.

As for the ride sharing stocks I mentioned in the beginning, they have both struggled to reward investors. Lyft was offered at $72, debuted at $87.24 on March 29, and dropped below $70 on April 1—its second day of trading. The stock fell below $50 in mid-May and then rallied back through the end of June. After spending most of July between $60 and $65, the stock has been trending lower and is now below the $40 level.

Uber’s debut wasn’t as bad as Lyft’s, but the last few months have been just as bad. The stock was offered at $45, debuted at $42 and peaked at $47.08 in June. The stock has trended lower since that peak and is now trading below $30.

Peloton was offered at $29 and hasn’t been near that price yet. To be fair the IPO was just a few weeks ago on September 25, so it has been trading in a rough overall market.

One of the things that have jumped out about the IPO market in 2019 is the number of companies that are going public without producing income. A recent article from CNBC cited research from Goldman Sachs and stated, “Just 24% of companies going public in 2019 will report positive net income this year — the lowest level since the tech boom and bust two decades ago.”

The article from CNBC pointed to an inordinate number of biotech IPOs as a possible culprit, or at least being partially to blame, for the large percentage of non-profitable companies. Goldman’s chief U.S. equity strategist David Kostin said biotech is dragging the average down, accounting for 28% of IPOs this year. None of those biotech names are projected to be profitable for the next three years, he said.

I wrote an article back in April about the hot IPO market, and in that article I stated, “Investing in IPOs isn’t a guaranteed success and it isn’t for the faint of heart.” While doing research for this article, I found the following table in an article from Fortune. I found it to be particularly interesting.

Like I said, success is not guaranteed when investing in IPOs, especially if you aren’t in on the actual offering.

About Rick Pendergraft

Rick has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick’s analysis process includes fundamental, sentiment and technical analysis. Rick started college as an education major, wanting to teach economics, but eventually changed to majoring in Economics and received a Bachelor of Science in Economics from Wright State University. His desire to inform and educate people is at the heart of his writing.

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