2021 was a big flop for blockbuster IPOs - The Average Joe

    2021 was a big flop for blockbuster IPOs

    Victor Lei β€” Head of Research

    November 30, 2021

    blockbuster ipo flops

    November 30, 2021

    Compared to previous years, 2021 was a terrible year for blockbuster IPOs. According to Financial Times, half of this year’s big IPOs β€” companies that raised over $1B upon going public β€” are now trading below their listing price.

    The number of IPO flops this year was far higher than past years. After 12 months of trading:

    • 27% of companies traded below listing price in 2020.
    • 33% of companies traded below listing price in 2019.

    What were some of the biggest flops of 2021? Since their first day closing prices:

    • Didi (NYSE:DIDI) β€” the Chinese ride sharing service β€” is down 49%.
    • Coupang (NYSE:CPNG) β€” the e-commerce giant of South Korea β€” is down 46%.
    • Oatly (NASDAQ:OTLY) β€” the oat milk company β€” is down 54%.

    Reminder: On average, US tech IPOs underperform 5-6 months after going public β€” around the time when most insiders are able to begin selling (180 days after IPO). Retail investors also have reasons to be cautious with blockbuster IPOs.

    • According to senior investment director at Abrdn (via FT), pressure from large private investors lead to high valuations.
    • This often benefits pre-IPO investors and insiders β€” at the expense of retail investors post-IPO.

    The Joe’s Take: With the market expecting a riskier 2022 ahead β€” investors should be extra cautious of companies trading at extreme valuations. Market corrections could take these companies down harder than the average.

    When it comes to investing, valuations matter.

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