In this article we discuss the 10 IPOs that flopped. If you want to skip our detailed analysis of these IPOs, go directly to the 5 IPOs that Flopped.
The blockbuster initial public offerings (IPOs) of technology companies in the past few months have led to fears of a tech bubble on Wall Street, with legendary investors like Michael Burry of Scion Asset Management warning of a “mother of all crashes” due in part to soaring valuations and weak fundamentals. Due to the retail investor frenzy into growth firms since March 2020, several companies have debuted to multi-billion dollar valuations. So far in 2021, IPOs in the US have generated $171 billion, beating the all-time record of $168 billion set in 2020.
The average one-day gain for IPOs this year so far has been more than 40%, a giant leap compared to the average gains of 28% and 21% in 2020 and 2019 respectively. According to financial intelligence platform Dealogic, IPO proceeds in the second quarter of the year were close to $24 billion. Investment bankers have projected that the total annual IPO proceeds this year could touch $300 billion. Investments into special purpose acquisition companies, a popular method of going public, have also increased dramatically during the past year.
In the midst of this ‘IPO boom’, investors should reflect on the situation and get back to basics to evaluate the growth potential that some of these new companies offer, pushing all the social media hype around them to the side. Mario Gabelli of GAMCO Investors, one of the most famous value investors in the world, has recently warned of the great variance in SPAC-facilitated IPOs. Indeed, some of the fears around the IPO craze have been realized amid a Chinese government crackdown against dual-listed firms.
A lot of stock experts have also compared the present tech boom to the dotcom bubble. In 1999, just before the dotcom bubble burst, it was the busiest year for IPOs. However, 2020 beat that record. 2021 is so far on track to surpass the numbers of 2020. The dotcom bust lead to a grand correction in the value of technology stocks. Growth investors like Cathie Wood of ARK Investment Management have dismissed these comparisons. In an interview to news platform CNBC, she said the market “could not be further away from a bubble”.
However, concerns around the valuations of tech firms persist. Tech firms now dominate the S&P 500 and five of the largest represent 20% of the entire index. These concerns have also led to more scrutiny around some IPOs that have flopped over the past three years so investors can position themselves against a bubble. Some of the most high-profile technology IPOs that flopped in the recent past include Zynga Inc. (NASDAQ: ZNGA), GoHealth, Inc. (NASDAQ:GOCO), and Sogou Inc. (NYSE:SOGO), among others discussed in detail below.
Tech-enabled disruption has also had an impact on the world of finance. The rise of crypto and fintech are prime examples. The new technologies have transformed how markets function and ushered in a new generation of investors into the field. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here is our list of the 10 IPOs that flopped. The share price of each firm, as of September 21, along with the price of the stock at the IPO, are listed alongside other details for further clarity.
The hedge fund sentiment around each firm was gauged using data of 873 hedge funds tracked by Insider Monkey. The analyst ratings of each firm are also discussed to provide readers with more context for their investment choices.
IPOs that Flopped
10. Tintri, Inc. (OTC:TNTRQ)
Number of Hedge Fund Holders: N/A
Share Price on September 21: N/A
IPO Price: $7 per share
Tintri, Inc. (OTC:TNTRQ) is placed tenth on our list of 10 IPOs that flopped. The company operates from California as a software firm.
Tintri, Inc. (OTC:TNTRQ) filed for bankruptcy relief in 2018, merely a year after it debuted on the stock market. Subsequently, the firm announced that it was seeking a loan from TriplePoint Capital and hiring a restructuring officer.
In September 2018, privately-held data storage firm DataDirect Networks purchased Tintri, Inc. (OTC:TNTRQ) in a deal worth $60 million. The company had traded on the NASDAQ market under the symbol TNTR.
Just like Zynga Inc. (NASDAQ: ZNGA), GoHealth, Inc. (NASDAQ:GOCO), and Sogou Inc. (NYSE:SOGO), Tintri, Inc. (OTC:TNTRQ) is also one of the firms that is yet to fulfill the potential investors hoped it would during the initial public offering.
9. Super League Gaming, Inc. (NASDAQ:SLGG)
Number of Hedge Fund Holders: 3
Share Price on September 21: $3.29
IPO Price: $11 per share
Super League Gaming, Inc. (NASDAQ:SLGG) is ranked ninth on our list of 10 IPOs that flopped. The firm owns and runs an esports and video gaming platform. It is headquartered in California. In 2019, when the firm debuted on the stock market, it raised $25 million from an initial public offering. However, in the opening round, the reception around the IPO wasn’t great, with the share price declining from $11 per share to $9.64 per share – a decrease of over 12%.
In May, investment advisory HC Wainwright initiated coverage of Super League Gaming, Inc. (NASDAQ: SLGG) stock with a Buy rating and a price target of $6, highlighting that the firm was an emerging player in the fast-growing esports sector.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in Super League Gaming, Inc. (NASDAQ: SLGG) with 1 million shares worth more than $5 million.
In addition to Zynga Inc. (NASDAQ: ZNGA), GoHealth, Inc. (NASDAQ:GOCO), and Sogou Inc. (NYSE:SOGO), Super League Gaming, Inc. (NASDAQ: SLGG) is also one of the stocks that had a blockbuster IPO but has since failed to register impressive growth numbers.
8. Casper Sleep Inc. (NYSE:CSPR)
Number of Hedge Fund Holders: 11
Share Price on September 21: $4.85
IPO Price: $12 per share
Casper Sleep Inc. (NYSE:CSPR) is a New York-based firm that makes and sells sleep products. It is placed eighth on our list of 10 IPOs that flopped. In early 2020, the firm raised $100 million in an initial public offering that was priced at the bottom of a price range – $12 per share – already lowered earlier. The firm, which was valued at around $470 million because of the cool reception to an IPO priced at $17-$18 per share, had fetched a valuation of more than $1 billion at a private fundraising round in 2019.
On July 14, investment advisory Goldman Sachs initiated coverage of Casper Sleep Inc. (NYSE:CSPR) stock with a Sell rating and a price target of $7, noting “fading” brand momentum for the firm and limited evidence of pricing power.
At the end of the second quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $17 million in Casper Sleep Inc. (NYSE:CSPR), down from 13 in the preceding quarter worth $14 million.
7. Root, Inc. (NASDAQ:ROOT)
Number of Hedge Fund Holders: 18
Share Price on September 21: $5.80
IPO Price: $27 per share
Root, Inc. (NASDAQ:ROOT) is an Ohio-based company that provides insurance products and services. It is ranked seventh on our list of 10 IPOs that flopped. The share price of the firm has fallen significantly since the IPO, much to the dismay of those who invested in the high-priced IPO. In February this year, the stock plunged 40% after the company reported a 50% decline in revenue and a 56% increase in net losses for the fourth quarter of 2020.
On August 19, investment advisory Morgan Stanley reiterated an Equal Weight rating on Root, Inc. (NASDAQ:ROOT) stock but lowered the price target to $7 from $14. Michael Phillips, an analyst at the advisory, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Silver Lake Partners is a leading shareholder in Root, Inc. (NASDAQ:ROOT) with 9.2 million shares worth more than $100 million.
6. SmileDirectClub, Inc. (NASDAQ:SDC)
Number of Hedge Fund Holders: 19
Share Price on September 21: $6.49
IPO Price: $23 per share
SmileDirectClub, Inc. (NASDAQ:SDC) is placed sixth on our list of 10 IPOs that flopped. The firm operates in the oral care industry and is headquartered in Tennessee. In 2019, when the firm went public, it priced the IPO at $23 per share, above a proposed range of $19-$22 speculated earlier. However, the price was not well received in the market, falling almost 27% on the first dat of trading to around $17 per share.
On September 20, investment advisory Stifel downgraded SmileDirectClub, Inc. (NASDAQ:SDC) stock to Hold from Buy and lowered the price target to $7 from $9, underlining that the firm was facing more headwinds than tailwinds.
At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $135 million in SmileDirectClub, Inc. (NASDAQ:SDC), down from 21 in the preceding quarter worth $177 million.
Zynga Inc. (NASDAQ: ZNGA), GoHealth, Inc. (NASDAQ:GOCO), and Sogou Inc. (NYSE:SOGO) are some of the stocks that have still yet to justify their IPO earnings to investors, along with SmileDirectClub, Inc. (NASDAQ:SDC).
Click to continue reading and see 5 IPOs that Flopped.
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Disclose. None. 10 IPOs that Flopped is originally published on Insider Monkey.
