The IPO Market’s Winners and Losers Last Week – April 10, 2022

Nat-gas services co.?Excelerate Energy (NYSE: EE)?launched the first IPO to raise over $100 million in over two months. It trades on Wednesday.

Excelerate is a decent, profitable business. The money will fund new projects, and close peer NFE has roared upward as economies rethink their reliance on Russian energy. And if you’re a certain type of person, there’s some joy in learning about the logistics of liquefied natural gas (LNG) and the role of floating storage and regasification units (FSRUs).

The IPO market couldn't get a break down -8.0% this past week, compared to -1.3% for the S&P 500. Just as the market was finding its legs, the Fed reiterated its resolve to raise rates as necessary to combat inflation. That’s a far cry from the past decade, when the US central bank stood at the ready to support equity markets.

In this environment, profits matter more than ever. Unfortunately, the largest IPOs in recent years have been money losers. Last year, 55% of IPOs in the largest decile had negative EBITDA.

It will take time for Silicon Valley to self-correct. Many execs at pre-IPO companies haven’t had to make the tough calls that come with operating in the black. And employees paid in stock options may find their “golden handcuffs” are made of pyrite.

So the 2022 roller coaster ride isn’t over. But to quote an old Merrill ad, in the long run it’s smart to be “bullish on America.”

Take care,