Buyer Beware: Peloton IPO Crash Tells Us The Global IPO Market Is Going Bust
Day two, the Peloton IPO continues to collapse, at the 10 am hour, shares are trading down -7% in the 23-handle, and in the last 645 minutes of trading, are now down more than 13%.
Peloton, having priced the IPO on Thursday at $29 – the upper end of the range – and being promoted by mainstream media as “oversubscribed,” has been a bloodbath for insiders who bought 40 million shares at $29 each, now collectively down 17.5%.
As Bloomberg pointed out, the worst opening trades for a $1 billion or greater IPO since 2008 are:
- SmileDirectClub -11% (Sept. 12)
- ADT -9.6% (2018)
- Uber -6.7% (May 10)
Peloton, opening-up at $27 on Thursday, was a 6.9% drop and thus the third-worst opening trade for a unicorn IPO.
There have been nearly 100 IPOs with better starts since 2008 after raising at least $1 billion.
None of this should be a huge surprise to readers as the value of Peloton on a fundamental basis, is nowhere close to $29, but rather worth $14 per share, something we outlined yesterday.
The collapse of the Peloton IPO is a massive embarrassment for underwriters Goldman Sachs and J.P. Morgan Securities, who have done very little, as far as judging by price action, in stabilizing trading for the second day.
It’s very likely the IPO window is shutting, with news overnight of Endeavor Group Holdings pulled its planned offering. Endeavor is the second recent company to pull its IPO after WeWork’s parent company pulled its offering earlier this month.
And the reason for the horrible performance of the Peloton IPO could be due to the global IPO market is collapsing as a worldwide recession is imminent, reported Dealogic, first reported by the Financial Times.
Nearly 845 companies listed their shares via IPOs globally so far this year, that’s a 25% decline versus the same period in 2018 and the lowest level since 2016.
Translation: the IPO market is closing as speculative money is finished betting in the global stock market casino.
“In more than two decades in the IPO market I’ve never seen so many risk factors and uncertainties,” said Martin Steinbach, IPO leader for Europe, the Middle East, India and Africa for EY, the consultant. “These uncertainties create volatility like we saw over the summer period and volatility has a negative correlation with IPO activity.”
Dealogic said Europe was the worst region for IPOs in 2019. Activity plunged by nearly 40% so far this year compared to the same period last year. The US posted a 23% decline.
As shown in a series of charts below, 2019 IPOs in the US have been a complete bust. Any millennial who bought into the whole CNBC hype of buying Lyft and Uber at IPO day is significantly in the red, and will be in the red for a generation to come.
Other IPOs, including Levi Strauss and Pinterest, are also underperforming as well.
In the Asia-Pacific region, IPO activity so far this year dropped 9%, versus the same time last year.
The window to IPO companies around the world appears to be rapidly closing as a global recession is imminent.
We noted earlier this week that a fascinating trend is developing among the ultra-wealthy: the dash for cash ahead of the next market crash.