In a sign IPO sellers are not tone-deaf, Pinterest is pricing its 75 million share IPO at $15-$17 a share, which at the $17 range would raise $1.3 billion and value the company at below the $12 billion it was valued at during its last round of fundraising in 2017.
By contrast, ride hailing service Lyft went public last week with a valuation 50 percent above its last round of funding.
But Lyft’s rocky debut has been an exception. Since Levi Strauss went public on March 21, there have been eight IPOs with market caps over $100 million.
The good news is returns have been good. Five are trading above their initial price, three below. The average return since Levi Strauss is 16.1%.
The bad news is the gains have all been on the first day of trading, for the most part. The aftermarket return (trading after the first day) for the eight has been -1.0%.
This is just the first round of more than 200 IPOs scheduled to go public soon. Kathleen Smith at Renaissance Capital notes that the real test will be coming soon: “The earliest ones out of the gate tend to be more profitable, and they tend to be priced more reasonably. As the cycle moves on, everyone gets sloppy about pricing, and returns tend to slip. But we are not at that point yet in the IPO cycle.”
As a warning, she pointed to Lyft, which was the first of the money-losing, highly valued unicorns to go public, and its reception has been rocky. Pinterest also lost money last year, though they were profitable in the fourth quarter.
Smith believes investors will be comparing Pinterest to near competitors like Snap, Twitter, and Facebook (Instagram).
IPOs in 2019 (from initial price)
- Silk Road Medical: up 80%
- Tradeweb Markets: up 31%
- Levi Strauss: up 28%
- GenFit up 16%
- Lyft: up 3.5%
- Precision BioSciences: down 8%
- NGM Biopharmaceuticals: down 6%
- Ruhnn Holding: down 32%