HASfter a terrible period of glaciation, the worst that Wall Street has experienced in three decades, IPOs are making their timid return this month of September. As an international star, British microprocessor champion ARM is in the process of raising $4.9 billion (€4.6 billion), based on a valuation of $50 billion. Instacart, the San Francisco food delivery company, is also due to go public, as is Klaviyo, the Boston digital marketing company, or the German sandal manufacturer Birkenstock, which submitted its application on Tuesday September 12 with a view to placing it on the market. So many operations heralding a recovery, after the bursting of the bubble linked to Covid-19?
It takes a long time to seduce investors lured by the Covid-19 years. At the time, money was free, with almost zero interest rates. As a result, stock market valuations soared, and stakeholders did not look at whether companies were making profits, preferring to bet on hypothetical growth. With the rise in rates, from zero to 5.25% since March 2021, it was a thaw on the stock market.
According to a study carried out in July by JP Morgan, 80% of IPOs in 2020 and 2021 had a negative return after two years, with an average loss of 30%. The share price of food delivery company DoorDash was halved, despite more than doubling revenue in two years, while data hosting company Snowflake lost a third of its value, while its activity has tripled.
The rebound still far away
The record was reached by the famous SPAC (SSpecial Purpose Acquisition Companies), these empty shells listed on the Stock Exchange, which absorbed a target company and avoided following the long classic path of IPOs. Nicknamed “blank check companies”, these SPACs were indeed real greed traps, except for their promoters who raked in many fees and various commissions: according to JP Morgan, they fell twice as much on the stock market as traditional IPOs. An emblematic example being that of WeWork, the office rental company, which went from $10 per share in October 2021 to less than 20 cents in August.
According to EY’s count, in 2020 and 2021, the American market had seen 640 IPOs, raising $242 billion. This figure fell to 154 operations, for $17.4 billion between January 2022 and June 2023. And still, 45% of the activity is the work of non-American companies.
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