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The IPO squeeze just keeps getting worse

March 15, 2022, 5:00 PM UTC

An astute tweet Monday from CNBC tech editor Ari Levy captured the brutal crush on share prices of nearly 20 midsize tech companies over the past 12 months. In doing so, Levy indirectly spotlights a trend that’s carrying over into 2022.

As Levy wrote, these disparate companies closed trading Monday with share prices at least 80% off their 52-week highs, far worse than the Nasdaq Composite’s decline of 21% from its 52-week peak. 

The victims of these crashes hail from various corners of the tech sector, including e-commerce (Rent the Runway, Wish, Vroom), software and cloud computing (Agora, Everbridge, Fastly), and insurance (Clover, Lemonade, Oscar). 

Some fell victim to unfortunate, out-of-their-control circumstances. Chinese ride-hailing company Didi, for example, felt the sting of China’s crackdown on tech firms. Other companies suffered from soaring costs or supply-chain snafus, such as Allbirds and Rivian.

They do, however, share a common trait: Every company (with a lone exception) went public in the past three years.

While the past few years brought numerous blockbuster tech IPOs, smashing records and exciting investors, the cold reality is that many of those frothy debuts have fallen remarkably flat—with no signs of slowing this year.

Look no further than Crunchbase’s list of the 10 largest IPOs in 2021, all of which operate in the tech sector.

Since the beginning of the year, the share price of all 10 companies is down at least 40%, which is double the Nasdaq Composite’s decline of 20%. California-based electric automaker Rivian, the superstar IPO of 2021, has fallen 65% since the start of January. South Korean e-commerce marketplace Coupang, which had the second-largest IPO, is off 44% year to date. Grab, Didi, and IronSource have dropped into penny-stock territory.

“Now that the sky-high prices of last year’s IPO boom have come back down to earth, active investors would rather pick up more shares of their strongest-conviction names than research new issuers,” analysts at IPO market tracker Renaissance Capital wrote in a blog post last week.

The slide shouldn’t come as a shock to those closely watching the IPO market. As 2021 ended, many analysts warned that the ongoing IPO selloff, looming interest rate hikes, and global economic uncertainty would push investors into less risky equities.

“While it’s a boon for the bankers to have a record number of IPOs, it’s an environment to tread very cautiously as an investor,” Denny Fish, a portfolio manager at Janus Henderson Investors, told the Wall Street Journal in late December. 

The IPO market has been quiet to start 2022, which is no great surprise given historical trends (the first quarter tends to be slow) and recent market volatility. While several upstart tech companies could go public later in 2022Stripe, Instacart, Chime, Reddit, Mobileye, among others—their timelines could be delayed owing, in part, to the IPO swoon.

“The market needs to be open and available to them, and investors need to be excited to take risk,” Nasdaq president Adena Friedman told Yahoo Finance last week. “And right now, the political and economic environment is more uncertain. So even though the pipeline is strong, a lot of companies are waiting until the second quarter to consider coming to the public markets.”

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Jacob Carpenter

NEWSWORTHY

Sprucing up for the market. SoftBank plans to trim its Arm unit workforce by up to 15% as it looks to curb costs ahead of a planned IPO for the British semiconductor design division, Bloomberg reported Monday. The cuts could total about 1,000 employees in the U.S. and U.K., though most of the layoffs would not target engineers, a source told Bloomberg. The move follows the collapse of SoftBank’s $40 billion effort to sell Arm to California-based Nvidia, a deal both sides abandoned in February amid antitrust scrutiny.

The Silicon Deutschland? Intel committed Tuesday to building two semiconductor manufacturing plants in central Germany, its first major spending pledge tied to a promised $88 billion investment in Europe, Reuters reported. The chipmaker said it will spend about $19 billion to develop factories in the city of Magdeburg, about 100 miles west of Berlin, while also contributing another $13 billion to expand existing factories in Ireland. The commitment comes two months after Intel announced plans to spend $20 billion to construct a chip manufacturing complex in Ohio, part of the company’s plan to regain semiconductor market share lost in the past two decades.

Moving on from the Mouse. Former Disney CEO and board member Bob Iger disclosed his first major career moves since leaving the entertainment giant for good last November, telling the Wall Street Journal that he has invested in five tech startups and taken a board seat on one. Iger, who helped launch several tech initiatives at Disney and oversaw its sprawling content universe, will serve on the board of Genies, a tech upstart that helps users create virtual avatars, clothing, and accessories underpinned by non-fungible tokens. Iger said he’s attracted to companies “using technology for disruptive purposes,” particularly those working in creative fields.  

First Russia, now China? A bipartisan group of lawmakers questioned Meta on Tuesday about the company’s advertising policies for Chinese state-sponsored media, a response to pro-Russia Facebook ads purchased by a state-controlled outlet following Russia’s invasion of Ukraine, Axios reported. Six members of the U.S. House submitted several questions to Meta officials, including whether Meta will let state-regulated Chinese media continue to buy ads on its platforms. Earlier this month, Meta banned Russian state media from advertising on Facebook and Instagram in response to the attack on Ukraine.

FOOD FOR THOUGHT

You don’t get a car. When Uber became the first major tech company to issue a net-zero carbon emissions pledge in 2020, the ride-hailing service dedicated $800 million toward meeting that goal. Turns out, that doesn’t get you very far. As Protocol reported Tuesday, Uber doesn’t really have a tangible plan for tackling its carbon problem. The best solution involves replacing gig workers’ internal combustion cars with electric vehicles. But that’s incredibly expensive (Uber doesn’t have Oprah money) and not particularly feasible given that the company can’t force 1 million drivers to give up their cars.

From the article:

Uber is now stuck in the middle of a mess somewhat of its own making. But it’s also a challenge that extends far beyond one tech company and is about much more than ride-hailing services. 

The company wants all of its drivers to use EVs eventually, but the price of those vehicles compared with the low wages its drivers earn mean it’s exceedingly unlikely the average Uber driver will roll up to your doorstep in a Chevy Bolt or a Tesla anytime soon. Widespread EV adoption would dramatically reduce one of the world’s biggest sources of carbon emissions—cars. As long as EVs remain a luxury, that change will not happen.

IN CASE YOU MISSED IT

Hydrogen power could help wean the world off Russian oil and gas sooner than you think, by Bernhard Warner

Why Overstock’s CEO won’t sell its flashy $100 million HQ despite a majority remote staff, by Phil Wahba

2 cities, 2 outbreaks, 1 lockdown: Shenzhen residents resent nearby Hong Kong for its ‘privileged’ COVID response, by Eamon Barrett

Elon Musk sold his houses during the pandemic, but now inflation has him saying own ‘physical things,’ by Will Daniel

Facebook employees criticizing the rollback of perks are blasted as freeloaders who ‘don’t care about company culture,’ by Sophie Mellor

Crypto sleuths claim to have sniffed out digital wallet with millions tied to sanctioned Russian oligarchs and officials, by Olga Kharif and Bloomberg

How Canada’s crackdown made the case for Bitcoin self-custody, by Nick Neuman

BEFORE YOU GO

To diplomacy and beyond. Space is the new Switzerland, for now. The Washington Post reported Tuesday that the U.S. and Russia continue to collaborate on the International Space Station, despite white-hot tensions between the two countries. A NASA astronaut is still expected to return to terra firma later this month on a Russian Soyuz spacecraft, while both nations will send new cosmonauts to the ISS in the coming weeks. The partnership, however, appears tenuous, with Russian officials threatening to break off a two-decade space alliance if the two sides can’t cool their jets.

Editor’s note: The Monday edition of Data Sheet omitted the first name and title of NFTfi founder and CEO Stephen Young in the attribution of a quote.

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