Share prices in the U.S. IPO “pop” fell by half

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Investors are no longer eager to invest funds in the US initial public offering, which reduces the company’s chances of pricing its stock higher than expected or enjoying a large share price “surge” on the first day of trading.

New data shows that since the first quarter, the IPO market has cooled down significantly, as the stock prices of listed companies have recently fallen and some high-profile initial public offerings have failed.

Dealogic’s data shows that in January and February, the IPO prices of companies that joined the New York Stock Exchange or Nasdaq rose by an average of more than 40% on the first day of trading.

In March and April, the average pop music dropped by nearly 20%, and in May, as of mid-last week, it dropped further to an average of 18%. The data does not include the IPOs of special purpose acquisition companies (Spacs), which are nearly exhausted after regulators cast a shadow on the market.

Most companies still rose when they debuted, but in the past few weeks, some public market entrants have declined on the first trading day. Chinese insurtech group Waterdrop fell 19% on its first day of listing, while Vaccitech, the company that owns the technology behind the Oxford/AstraZeneca coronavirus vaccine, fell 17%. The biotech company Talaris Therapeutics dropped 4.4% when it debuted in early May.

Rachel Phillips, a partner in the capital markets practice of the Ropes & Gray law firm, said: “This is not the’everyone wins’ market in the first quarter.”

The pricing of the IPO itself has also become stricter.

According to data from Refinitiv, in the first quarter, a quarter of companies listed in the United States had IPO stock prices higher than expected. The fourth quarter of last year was even hotter, with nearly 40% of people successfully surpassing their range.

Refinitiv data shows that since the beginning of the second quarter, the proportion of companies that exceeded pricing expectations has fallen to 11%. 13% of prices were lower than expected-this is the highest percentage since at least the beginning of the pandemic.

Jeff Bonzel, head of equity capital markets at Deutsche Bank, said that at the beginning of this year “the market environment was very optimistic.” He said that in January this year, every US technology IPO was priced above its range.Now, “the market has a lot of room for retreat[but]… This is not to say that the IPO market has broken down or is in poor condition.”

The price bar chart is increasingly in line with expectations (number of IPOs), showing that the US IPO price is below the expected range

There is still a month to go before the second quarter. So far, 54 companies have raised $18 billion. According to data from Refinitiv, 101 companies excluding Spacs raised $42 billion in the first quarter, which is the highest level of quarterly IPO earnings during the pandemic.

Investors still call for an IPO.

Figs, a hospital scrub brand that joined the New York Stock Exchange on Thursday, price its IPO at $22-$3 higher than the high of its range-and then rose 36% on the first day of trading. The company’s stock price rose another 14% on Friday.

“No matter where the market is, this is our time,” said Heather Hasson, the company’s co-founder.

Other companies are more susceptible to market conditions. At least three companies cited the stock market volatility in May as the reason they chose to postpone their IPO.

“That’s the problem. When you do an IPO, you will be affected by the unpredictable market changes,” said Tom McInerney, CEO of Genworth Financial. Mid-May. When concerns about price competition and inflation caused the industry’s stock prices to fall by more than 10%, the company decided to postpone the IPO at the last minute.

“We see it as… bad luck,” McKinney said.

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