The IPO Market’s Winners and Losers Last Week – JULY 30, 2023

We’ve always taken a direct listing’s ‘reference price’ with a grain of salt. Now it might be a pound of salt.

Regional airline Surf Air Mobility (NYSE: SRFM) did a direct listing on Thursday after announcing a reference price of $20. But the stock finished the week below $3, a loss for anyone that bought at the $5 open.

Unlike an IPO price, there’s no investor money behind a reference price. The public market is where the rubber meets the road.

Surf Air is an early-stage company in the middle of a merger with a lot of execution risk and complex financing. Despite some recent wins in the IPO market, investors are happy to sit on the sidelines if a deal fails to excite. That’s especially true of direct listings, since there’s no rush to buy on day one.

After a 3-month break, micro-cap IPOs are back. Four small IPOs each raised less than $10 million this week (WRNT, ELWS, JNVR, PRZO), all of which traded down double-digits. Two blank checks also completed IPOs, so new SPACs aren’t gone entirely, they’re just returning to pre-2020 levels.

The week ahead has a few small deals, but the biggest listing isn’t an IPO. On Monday, Massachusetts-based appliance brand SharkNinja (NYSE: SN) begins trading as a standalone company in the US, after a direct distribution to shareholders of the Hong Kong parent company.

The Renaissance IPO Index gained +3.3%, compared to +1.0% for the S&P 500. The Fed raised rates as expected, but low inflation data on Friday caused a rally in IPO stocks. China led the IPO winners thanks to softer policy talk from Beijing, with EV maker Xpeng soaring +60.6% after a major investment from VW. Car rental service Hertz was the bottom performer, off -12.7% after Q2 revenue fell short of estimates.

Talk soon,

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