The father or mother firm of on-line retailer Want would be the subsequent know-how firm seeking to elevate greater than $1 billion and make the most of the market exuberance showcased by DoorDash Inc.’s and Airbnb Inc.’s preliminary public choices.
ContextLogic Inc., which owns Want, is wrapping up its digital roadshow with buyers and the deal is multiple-times oversubscribed, in response to individuals accustomed to the matter who requested to not be recognized discussing pricing. A Want consultant didn’t reply to a request for remark.
Whereas it’s unclear the place Want will find yourself pricing its shares on Tuesday, the way it trades on Wednesday will decide whether or not it follows within the footsteps of Airbnb and DoorDash in fueling the controversy over “money left on the table.” Want’s providing is being led by Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp.
Managing the first-day “pop” responsibly and never underpricing shares is a key element in how firms are planning their very own IPOs within the coming months.
DoorDash soared 86% in its buying and selling debut final week after the corporate’s $3.14 billion providing. The next day, Airbnb’s shares closed their first day up 113% after its $3.83 billion IPO together with so-called greenshoe shares.
For Extra: Airbnb, DoorDash Rallies Stoke Debate on Pricing IPOs
Executives at each DoorDash and Airbnb acknowledged the pricing challenges final week, as retail demand coupled with scarce provide boosted shares. Analysts on Monday warned that first-day buying and selling surges left the businesses’ valuations at precarious ranges, weighing on shares. Airbnb closed down 6.6% whereas DoorDash fell 8.6%.
Pricing an IPO is a “bit of an art,” funding banker Chris Malik, managing director at KeyBanc Capital Markets, mentioned in an interview.
Whereas IPOs are designed to present a premium to institutional buyers taking an opportunity on a brand new stock, an enormous rally can go away buyers questioning why shares weren’t priced greater. If the stock doesn’t pop — or worse if it falls — firms might be considered as failures for not attracting buyers.
“What you don’t want to do is price too robustly and not leave any upside in the after market,” Malik mentioned.
The controversy comes close to the tip of what’s already a file yr and month for listings. Greater than $19 billion has already been raised in IPOs on U.S. exchanges in December — a file for the month — bringing 2020’s complete to about $172 billion, in response to information compiled by Bloomberg.
A smaller San Francisco-based unicorn, the lending startup Upstart Holdings Inc., is seeking to elevate as a lot as $264 million and also will begin buying and selling the identical day as Want.
At the very least one firm revisited its plans following the acute share strikes final week. DoorDash’s and Airbnb’s pops performed a task in online game firm Roblox Corp. delaying its IPO till subsequent yr, in response to individuals accustomed to the matter. The corporate’s chief govt officer hinted in a memo to staff that the corporate was going to make use of the additional time to restructure the providing.
“We’ve seen companies take innovative approaches to creating a more market-based relationship between investors and companies,” CEO David Baszucki instructed staff in a memo final week. “Primarily based on all the pieces we now have discovered up to now, we really feel there is a chance to enhance our particular course of for workers, shareholders and future buyers each huge and small.”
The CEO added that the corporate would work with advisers on making the enhancements and is now early subsequent yr for the itemizing.
It wasn’t clear what enhancements to the method Roblox was contemplating. Some improvements in IPOs in current months embrace permitting staff to promote a portion of their stock beginning on day one, which Airbnb allowed, and shorter lock-up durations basically for insiders.
A Roblox consultant declined to remark additional.
Roblox additionally introduced an acquisition on Monday of a startup referred to as Loom.ai. Acquisitions within the lead-as much as an IPO can generally gradual the method with the U.S. Securities and Change Fee since they contain updating the submitting.
One other IPO candidate, installment loan supplier Affirm Holdings Inc., introduced an acquisition final week of Canada’s PayBright for C$340 million ($267 million) in cash and stock, and it additionally needed to replace its paperwork.
Affirm’s IPO might slip till subsequent yr as a result of it’s nonetheless engaged on clearance from the SEC, Bloomberg Information has reported, citing individuals accustomed to the matter. Nonetheless, Affirm executives and its advisers labored by way of the weekend and Monday in a last-ditch effort to carry the IPO this month, one of many individuals mentioned.
The corporate will make a last resolution later this week on the timing of its itemizing, and there’s nonetheless an opportunity it may very well be this yr, that particular person mentioned. A consultant for Affirm declined to touch upon its deliberations.