IPO Market Analysis: Mixed Signals and What They Mean

Recent IPO Activity: A Mixed Landscape

While the Coinbase direct listing garnered significant attention this week, other important initial public offerings (IPOs) also unfolded. Analyzing these events paints a nuanced picture of the current IPO market.

We are currently experiencing a somewhat more volatile IPO period compared to the previous quarter. Following a stretch of consistently strong IPO debuts, several companies opted to postpone their offerings as the second quarter began, a surprising turn of events.

Compass recently went public, though its performance didn’t quite reach anticipated levels. This week, however, saw considerable activity across several IPOs.

Below is a concise overview of IPO news from the week, along with our assessment of the market sentiment surrounding each:

IPO Highlights of the Week

• UiPath’s Initial Price Range: Neutral to Bearish. Despite expectations for a revised, higher IPO price range, UiPath’s initial valuation of approximately $9 billion didn’t inspire strong confidence. It remains uncertain whether the valuation will increase before trading commences.
• Coinbase’s Direct Listing: Pretty Bullish. The company’s deliberately conservative reference price contributed to substantial post-debut gains.

Coinbase’s current valuation, after a few days of trading, is estimated around $60 billion to $65 billion. While initial fully diluted figures were somewhat inflated, the successful direct listing of a highly profitable cryptocurrency exchange is a positive sign.

• Grab’s SPAC Deal: Pretty Bullish. The public listing of the Southeast Asian superapp in the United States is noteworthy. Securing a Special Purpose Acquisition Company (SPAC) for this purpose was unexpected, and the $4 billion PIPE investment is characteristic of 2021 trends.

Considering the company’s challenges in 2020 and its strong growth trajectory, coupled with improving profit margins, Grab presents an attractive opportunity for investors. Its nearly $40 billion equity valuation warrants close attention, signaling a bullish outlook.

• AppLovin’s IPO and Initial Performance: Neutral to Bearish. This IPO was surprising. AppLovin, operating in the mobile app sector, priced its shares mid-range but experienced a subsequent decline in value.

Shares priced at $80 closed the first day at $65.20. This performance may be attributed to the company’s intention to use IPO proceeds for debt repayment. The initial reception was hardly bullish.

• Zenvia’s F-1 Filing: Neutral, Pending Further Analysis. Zenvia, a Brazilian company, has a complex corporate structure and recent financial dealings that require further scrutiny.

Backed by several investment firms, Zenvia has raised significant capital privately. While its potential as a LatAm tech offering is promising, its intricate financials currently prevent a definitive assessment.

Overall Market Assessment

Our analysis reveals two bullish, two bearish, and one neutral IPO. This suggests a relatively stable, albeit active, IPO market.

The shift in market dynamics may not indicate a closing IPO window, but rather a return to more typical conditions. Just as one might reach for a sweater when the temperature drops from extreme heat to comfortable warmth, investors are adjusting to a more normalized IPO environment.