Stock Market

Nearly 90% of U.S. stocks fall below their offering price in 2021

Quotes of about 87% of the shares of companies that entered the US exchanges in 2021 fell below the IPO price. From the moment of placement until the close of trading on September 23, quotes fell by an average of 49%, according to The Wall Street Journal, citing data from the Dealogic financial platform.

Shares of platform Robinhood Markets Inc (NASDAQ:HOOD) have fallen more than 70% compared to the offering price, while digital education services provider Coursera Inc (NYSE:COUR) has more than halved.

This is a deterrent to fund managers, who usually shy away from new offerings if newly bought stocks perform poorly. According to some bankers, funds are unlikely to return to the IPO market until stocks start to recover. As a result, activity in the IPO market may decrease not only this year, but also in the future.

“Investors expect IPOs to be successful, and usually they are,” said Mark Schwartz, head of IPO and SPAC capital markets advisory at Ernst & Young.

However, he added that recent placements, on the contrary, show poor results, and this is one of the reasons for such low activity on the market.

The current year has become one of the worst for the IPO market. By comparison, in 2022 IPOs (excluding SPACs) raised a combined $7.2 billion, while in 2021 companies raised a record $154 billion. higher than the IPO price, but by the end of the year the situation changed, and two-thirds of the shares fell below the offering price.

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Approximately 85% of the shares of companies that went public this year are also trading below the IPO price. In mid-September, the international insurance and financial corporation American International Group Inc (NYSE:AIG) listed its life and asset management unit Corebridge Financial Inc (NYSE:CRBG) on the stock exchange. The IPO, which was the largest in 2022, raised $1.68 billion. However, the placement was at the lower end of the price range of $21-24 per share, and from the moment of the IPO until the close of trading on Monday, September 26, the paper Corebridge Financial fell 4.58%.

The difficult market situation has prompted some companies to postpone the planned IPO date from 2022 to 2023 or abandon plans to go public at all. The top three underwriters — Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and JPMorgan Chase (NYSE:JPM) — also reported sharp declines in investment banking earnings in the second quarter.

According to some experts, to improve the situation on the IPO market, it is not necessary that all shares rise above the offering price. Steve Malecki, head of equity capital markets at William Blair, says it’s more important that the next three or four IPOs perform well.

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