Major US IPO Stocks Plunge One After Another... Investment Warning for Next Year

Robinhood, Coupang, Bumble and Many IPOs Underperform
Contrasted with S&P 500 Index Rise
Impact of Interest Rate Hikes and IPO Expansion
IPO Boom Expected to Continue Next Year... Investor Caution Needed

[Asia Economy New York=Correspondent Baek Jong-min] If you invested in the S&P 500 index in the New York stock market this year, you would have earned a 27% return, but many investors in newly listed companies suffered significant losses. It was a feast famous for rumors but with nothing to eat.

US media outlets such as The Wall Street Journal and CNN reported on the 29th (local time) that although the IPO fever spread this year, investment performance was extremely poor.

CNN, citing Dealogic, found that among companies that raised more than $1 billion through IPOs in the New York stock market, 20 traded below their IPO price. Only 16 companies maintained stock prices above their IPO price.

The WSJ reported that two-thirds of newly listed companies are trading below their IPO price.

Looking at the Renaissance IPO ETF, which tracks newly listed companies, this situation becomes clear. The Renaissance IPO ETF price fell 11% compared to the beginning of the year. This contrasts with the 27% profit that could have been made by holding an ETF tracking the S&P 500 index during the same period.

Companies that were a hot topic at the time of listing have consecutively failed to perform well. Oatly (54%), Coupang (16%), Robinhood (54%), and Didi Chuxing (61%) are cited as representative cases of stock price underperformance.

The WSJ explained that until the first half of the year, newly listed stocks performed well, but their prices sharply declined in the second half.

Professor Jay Ritter of the University of Florida explained, "Most IPO companies this year surged on the first day of listing but failed to meet market performance." Professor Ritter diagnosed the poor performance of newly listed stocks as due to excessive overvaluation. Oatly and Coupang, despite being loss-making companies, were recognized with high IPO prices and then plunged.

The causes of the decline in newly listed companies' stock prices are estimated to be twofold. First, as the Federal Reserve (Fed) began full-scale tightening, most IPO companies, which are growth stocks, lost investment appeal. Second, there is criticism that excessive supply occurred due to 400 IPOs and 600 mergers with Special Purpose Acquisition Companies (SPACs).

Kim Beom-seok, then chairman of Coupang's board, posed in front of the New York Stock Exchange (NYSE) in the United States on March 11 (local time) ahead of the company's listing. Coupang's stock, which IPOed at $35, started trading at $63.5 but closed at $28.93 on the 29th.
[Photo by Yonhap News]

Denny Fish, portfolio manager at ReNews Anderson Investors, advised, "Investment banks may welcome the increase in IPO cases, but investors need to be very cautious about investing."

Of course, there are cases where stock prices surged after listing. Electric vehicle maker Rivian and semiconductor company GlobalFoundries have recorded increases of more than 30% compared to their IPO prices.

Wall Street expects the IPO fever to continue next year as well. JP Morgan predicted that this year's poor performance of IPO companies would not lead to a contraction of the IPO market next year.

Aloke Gupte, head of the European, Middle Eastern, and African equity markets at JP Morgan, expressed, "Market liquidity will continue to overflow next year."

Since the causes of this year's IPO companies' stock price decline are expected to continue next year, advice has emerged that investment in newly listed companies next year should still be approached cautiously.

The community site Reddit, the epicenter of the US meme stock craze, has submitted documents to the US Securities and Exchange Commission (SEC) for listing next year. There are already forecasts that its corporate value will exceed 17 trillion won.

This content was produced with the assistance of AI translation services.