The weak performances of Snap (SNAP) and Blue Apron (APRN) in the stock market since the two came public in recent months is putting a damper on what was expected to be a strong year for initial public offerings.
Autoplay: On | OffSnapchat-owner Snap was one of the most anticipated IPOs since the Facebook (FB) blockbuster in June 2012. Like Facebook, which has quadrupled in price since its IPO, the hope was that the Snap IPO would bring other unicorns — companies with a pre-IPO valuation above $1 billion, like Blue Apron — galloping out of the gate. It didn’t happen that way.
Snap and Blue Apron are both down sharply since their IPO debut. Snap, which came public on March 2, is down 18% from its IPO price of 17 and down 53% from its record high. Blue Apron, which started trading June 29, is down 25% from its IPO price of 10 and down 32% from its record high of 11.
“Those deals did not treat IPO investors very well, which creates more caution,” said Kathleen Smith, principal of Renaissance Capital and manager of the Renaissance IPO-focused exchange traded fund. “I don’t see the market getting more enthusiastic.”
In other words, don’t expect to see closely watched tech unicorn companies such as Uber, Lyft or Airbnb find any impetus to make a public debut. For one, these companies have had steady access to funding. Plus, they’ve not yet expressed a desire to tap the public markets with an IPO. There’s also no word yet on the expected IPO filings of Flipkart, WeWork, Peloton and Pinterest.
But music-streaming service provider Spotify has been active, with rumors that it is talking to IPO underwriters, said Smith. And despite some high-profile stumbles into the public markets, the IPO market this year looks relatively healthy compared with 2016.
Up 73%
There have been 83 IPOs on U.S. markets thus far this year, up 73% from the same period a year ago, with total proceeds up 159% to $21 billion, according to Renaissance. Still, IPOs are coming to market at a slower rate than in previous years.
“The question is can we get above 2015 levels. That might be a stretch,” said Smith. “It’s definitely far better than last year but slower than we expected.”
By standard measurements the IPO market should be stronger, Smith said. IPOs this year are, on average, up 12% from their IPO price, with an average first day pop of 9%, both considered healthy numbers for the market overall, said Renaissance. The primary growth engine for new IPOs is a strong stock market, major components of which are near record…