(BFM Bourse) – Three-quarters of US companies listed on the stock exchange between 2019 and 2021 are now trading below their IPO price. A godsend for some private equity firms that can afford these fallen stars at dirt cheap, reports the Financial Times.
The Nasdaq is currently experiencing its most severe correction since March 2020. And companies that previously took advantage of the market euphoria to go public are paying a heavy price for the decline in stock market indices.
Of more than 400 companies that raised more than $100 million between 2019 and 2021, 76% saw their stock price drop below their IPO price, reports the FinancialTimes based on data from the specialist firm Dealogic. The median fall of the companies in this panel since their IPO is 44%.
Among the hardest-hit companies are former stockbrokers such as no-fee brokerage Robinhood, delivery and transportation services Lyft, and DoorDash, all of which went public no later than buoyed by the rebound in global stock markets. But the tide has since turned… The Nasdaq has fallen more than 30% since the start of the year, weighed down by the Fed’s relentless fight against persistent inflation.
Hard, hard to be aside
These injured prey whet the appetite of private equity funds, reports the Financial Times. And some boards of directors would have been receptive to these well-supported expressions of interest. Identity and access management software maker ForgeRock last week accepted an offer to buy private equity firm Thoma Bravo for $2.3 billion, just over a year after its September 2021 IPO. ForgeRock’s share price has fallen as much as 50% below its IPO price. Even with the 53% premium that Thoma Bravo agreed to pay to buy ForgeRock, the proposed price of $23.35 is significantly lower than the closing price on its first day of trading ($47.15), the September 17, 2021.
the FinancialTimes also returns to the Poshmark group, which is the equivalent of Bon Coin. The group sold to South Korean conglomerate Naver for just $1.2 billion, a nearly 60% discount to its IPO price ($42). Casper Sleep, the mattress manufacturer, has also succumbed to the sirens of a return to the shadow of the financial markets. In 2021, it sold to a private equity firm for less than $300 million, again well below the value that gave it its 2020 IPO price.
Private equity funds on the lookout
Private equity funds would above all have much more frank intentions than listed companies – other than “private equity” funds themselves present on the stock market – to take control of these fallen stars. They would have a comfortable mattress estimated at more than 500 billion dollars to achieve their ends, according to data from Preqin cited by the FinancialTimes.
Listed companies that are not private equity funds can compete with them all the less as they have to manage their own stock market prices against investors who take a dim view of risky external growth operations. This is evidenced by the 15% drop in Naver shares since the announcement of the takeover of Poshmark.
“It’s really hard to be a listed company these days,” a prominent private equity investor told The Daily Mail. FinancialTimes. “Good news gets dropped and bad news gets punished. It’s the worst of both worlds.”
Sabrina Sadgui – ©2022 BFM Bourse