The IPO Market’s Winners and Losers Last Week – Sep 24, 2023

In with a bang, out with a whimper.

Grocery delivery platform Instacart (Nasdaq: CART) priced above the range and opened at a +40% premium, but closed the week right at its offer price. Marketing SaaS provider Klaviyo (NYSE: KVYO) also priced up and opened +23%, but finished Friday +11% above offer. Recent mega-IPO Arm (Nasdaq: ARM) officially broke issue during the week.

It doesn’t make for a great headline, but the month’s trio of big tech IPOs could be summed up as “incrementally positive.”

Last week I pointed to Klaviyo as the best indicator of the three. Its pricing and trading tell us that best-in-class software companies with growth, profitability, and attractive valuations can find buyers. Other tech unicorns will have to wait, and we’re hearing more and more deals push back IPO plans to 2024.

Markets certainly didn’t help. The Nasdaq, S&P 500, and IPO Index all had their worst week since March, as investors grappled with higher rates becoming the “new normal.” The S&P traded off -2.9%, and the IPO market slid -6.4%. Mobileye was the IPO Index’s top performer up +6.2%, while consumer lender Affirm pulled back -17.2%.

The year’s sizable IPOs have averaged +18% from offer on the first day, but are now only up +6%. Aftermarket returns are an important “autocorrect feature” of the IPO market, and right now they tell us that future IPOs will need to price at greater discounts to public peers. Ultimately that price discipline is good for investors.

Coming up, sandal maker Birkenstock (NYSE: BIRK) is eligible to launch its roadshow next week ahead of an October listing. Aside from that, filing activity signals only modest deal flow in the next few weeks. Of course, the IPO market could grind to a complete halt if there’s another US government "shutdown" on October 1.

Stay tuned,

Bill Smith

Co-Founder and CEO

Renaissance Capital

Visit us at www.RenaissanceCapital.com