Premarket stocks: IPOs were hot. Now investors are dropping them

But after that the shine often went off. Of the U.S. IPOs that raised more than $ 1 billion in 2021, 20 are trading below their IPO price while only 16 are above, according to data from Dealogic made available to Before the Bell this week.

“After that jump on day one, IPOs have on average underperformed the market this year,” said Jay Ritter, a professor at the University of Florida who studies IPOs.

See here: At the close of trading on Tuesday, Bumble was trading 22% below its IPO price. Oatly was 54% lower.

The exchange-traded fund Renaissance IPO, which tracks newly listed companies in the US, is down 11% since the start of the year. The S&P 500 is up 27% over the same period.

What gives? Ritter believes the discrepancy has a lot to do with the sky-high expectations for Wall Street.

“I would largely attribute that to the high ratings many of these companies started out with,” he said. “When you’re starting out with really high value for money, a company has to act to avoid disappointing investors.”

When Oatly went public, it was valued at $ 10 billion, although it was not yet profitable. Bumble, also loss making, had a valuation of more than $ 7 billion.

This is not unusual in itself, said Ritter. The “vast majority of companies that go public have negative profits,” he noted.

Traders bet companies will be next Amazon (AMZN), which warned of “considerable operating losses for the foreseeable future” when it went public in 1997. The internet giant is now making billions in profit every quarter.

But as the specter of rate hikes looms in 2022, investors are rethinking their exposure to riskier assets – causing them to rethink some previous IPO purchases.

Not everyone takes a punch. The shares of the electric car manufacturer Rivian, which only started producing and delivering vehicles in September, rose by 32% compared to the stock market price. The company is now worth nearly $ 93 billion – more than ford (F.) and General Motors (GM).

Chipmaker GlobalFoundries, which went public in October, is 39% higher.

Outlook: The poor performance of many IPOs over time is unlikely to dampen demand for new listings in 2022, according to Aloke Gupte, co-head of Equity Capital Markets at JPMorgan for Europe, Middle East and Africa.

“Structurally, I don’t see anything different in 2022,” Gupte told me.

Even if the stock markets pull back, companies will continue to strive to raise funds to keep growing.

“Liquidity is still being flooded,” he said.

Bottom Line: U.S. companies raised $ 118 billion in 2021, more than ever, according to data collected by Ritter at the University of Florida. With interest rates rising, investors could be more selective about which companies to support next year, Gupte said. But the 2021 pullbacks are unlikely to scare them off.

Omicron is playing with the economic recovery

Thousands of flights canceled. Back-to-the-office plans put on hold. College football bowl games and Broadway shows have been canceled. Closed Apple (AAPL) Shops in New York City.
Covid shakes America’s economy again, reports my CNN business colleague Matt Egan.

The disturbance is different this time. Vaccines and boosters are widely available, symptoms of Omicron appear milder than previous variants, and government officials swear not to order an economy shutdown.

But the breathtaking speed at which Omicron is spreading – and the lack of available tests – is creating serious problems for families and businesses tired of Covid.

“This is definitely a setback to recovery,” said Kathryn Wylde, president and CEO of the Partnership for New York City, an influential group of companies.

With Covid cases on the rise, many companies have told office workers to stay home, dashing hopes among bosses and local businesses of having employees back in person in January.

“Everything is back in the air,” said Wylde, blaming a combination of omicron and confusion over New York City’s vaccine mandate for private sector workers. “The longer it takes, the harder it is to get people back into the office.”

The chaos is at its worst at the airports. Another 3,000 flights worldwide were canceled on Tuesday, and another 2,000 were cut today. The problems are caused in part by an increase in the number of crew members, which further weighs on the labor shortage in the industry.

To ease pressure on the economy, the U.S. Centers for Disease Control and Prevention on Monday cut down the recommended times people should isolate after a positive Covid-19 test if they have no symptoms. But the fear grows.

“The whole world is getting tired of this thing. It creates international frustration with governments that have been unable to control it,” said David Kelly, chief global strategist at JPMorgan Funds. “This is a virus that is smarter than our political systems.”

$ 4 gas could hit the United States by Memorial Day

Pump pain can get worse before it gets better.

That emerges from a new GasBuddy forecast, which projects the national average will rise to $ 3.41 per gallon in 2022, up from $ 3.02 per gallon this year.

Such a move would undo some of the recent relief American drivers have experienced as gasoline prices move away from seven-year highs.

The national average at the pump fell to $ 3.28 per gallon on Wednesday, according to the AAA. That’s 14 cents off the November 8th high of $ 3.42.

Looking ahead, the GasBuddy Forecast predicts that gas pump prices will peak nationwide in May, a monthly average of $ 3.79.

“We could see a national average flirting with, or at worst, potentially exceeding $ 4 a gallon,” said Patrick De Haan, director of petroleum research at GasBuddy, an app that tracks fuel prices, demand and outages.

That would add to the inflationary pressures that hit American families, who are grappling with the biggest price spikes in nearly 40 years. And it would add to the White House’s political headache and go against government predictions.

The US Energy Information Administration said earlier this month that it expects the national average to drop to $ 3.01 per gallon in January and to $ 2.88 per gallon by 2022.

Next

The pending US home sales for November arrives at 10 a.m. ET. The latest US crude oil inventory data will follow at 10:30 a.m. ET.

Tomorrow: Last week’s unemployment claims.

About Cindy Johnson

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