This article was last updated on April 16, 2022
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Initial public offerings are receiving their chilliest reception on record, both in terms of one-day return and the offer price relative to the initial filing range, according to Dealogic, which has tracked the data for the last decade.
The average return on the first trading day for new U.S. companies is 5.3 percent, on track for the lowest since at least 2000, the Dot-com peak when IPO’s soared on average by 60 percent during their first trading day. Additionally, almost half of the initial offerings this year have priced below their initial filing range, according to Dealogic, the highest percentage on record.
Traders blamed the poor performance on the absence of the retail investor in the market, sponsors pressuring banks to come to market with the highest valuation they can and a volatile, sideways stock market.
"With banking generally under pressure from a revenue standpoint and more competitive, the venture capital firms are pushing banks on valuation, making it less attractive to investors," said Stephen Weiss of Short Hills Capital.
The S&P 500 is little changed this year after surging from its 12-year low reached in March of 2009. During that surge, however, the retail investors actually pulled money out of equities and put it into bonds, still reeling from yet another burst bubble.
"IPO’s having a difficult year is not surprising when you consider that many investors have turned away from equities in favor of other asset classes," said Jim Iuorio of TJM Institutional Services. “This is another manifestation of investor mistrust and risk aversion."
The top 1-day performer was MakeMyTrip’s $81 million offering, according to the note. The online travel agency based in India jumped 89 percent on its first day of trading last month and has continued higher since.
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