We're now examining the initial public offering valuations of Upstart and Wish, potentially representing the concluding fintech and e-commerce launches of the year. Both companies established their pricing last night and trading will commence this morning.

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With that covered, let's turn our attention to IPO pricing for what may be the last time this year, and analyze what the stock market is communicating regarding these two new offerings.

It’s worth remembering that we’ve recently seen three IPOs achieve exceptionally strong performance, leading two prospective launches – Affirm and Roblox – to postpone their public debuts until they could establish greater certainty in their valuations. Therefore, did Upstart and Wish experience similarly impressive pricing increases?

Actually, that wasn’t the case.

Understanding Moderate IPO Pricing

It’s understandable if you’ve become used to initial public offerings (IPOs) increasing their price range and ultimately being priced above the projected interval, leading you to believe this is the norm. However, this isn’t consistently the case.

Wish and Upstart serve as clear examples of this phenomenon. Here’s a breakdown of the details for each:

• Wish: The company priced its shares at $24 each, reaching the high end of its $22-$24 per share range. The company’s value is slightly over $14 billion, factoring in shares allocated to underwriters, but excluding other shares that would affect the fully diluted valuation. This represents a positive outcome for early investors who previously valued the company at $11.2 billion during a $300 million Series H funding round in August 2019. Despite only a moderate increase in price from its prior valuation, Wish successfully raised $1.1 billion in its IPO.
• Upstart: Priced at $20 per share, the company settled at the lower end of its $20-$22 per share range. The company is valued at just over $1.4 billion on a nondiluted basis. This pricing is advantageous considering the company was last valued at approximately $750 million. Furthermore, it secured $180 million in gross proceeds, significantly exceeding the $50 million raised in its previous private funding round.

As evidenced by the description above, these pricing outcomes should not be considered setbacks. Instead, they represent substantial successes in terms of financing, providing significant new capital at increased valuations. Both companies still have the potential for substantial price increases and positive market performance.

However, it seems the strong interest observed last week with C3.ai, DoorDash, and Airbnb was more exceptional than initially anticipated. I had predicted Wish would price above its initial range, given its position as an e-commerce company—a currently popular sector—and its established brand recognition. This did not occur. Similarly, Upstart combines fintech and artificial intelligence, both areas highly sought after by investors in both private and public markets recently.

It’s difficult to dismiss a near doubling of Upstart’s valuation as disappointing; I still anticipated a greater increase.

These IPOs offer several positive signals for other unicorn companies. While predicting pricing outcomes may remain challenging, general demand for IPO shares remains robust even as the year progresses. Moreover, even less well-known IPOs can achieve success, as demonstrated by Upstart.

Therefore, these IPOs largely convey positive news. The absence of excessive initial enthusiasm could even signal a return to more typical market behavior. While it’s premature to draw definitive conclusions, a continuation of this trend toward more measured debuts could indicate the beginning of such a shift.