More than 50 of the 80 companies that have gone public so far this year are winning. They're trading above their IPO prices, and in some cases have even more than tripled in 2019. Everybody loves talking about the winners, but let's not ignore the more than two dozen stocks that are currently trading below their initial prices.
Lyft (NASDAQ: LYFT), Linx S.A. (NYSE: LINX), and SciPlay (NASDAQ: SGMS) all went public in the first six months of this year, and they're all broken IPOs. Let's dive into where things went wrong for the three out-of-favor investments.
Image source: Lyft.
1. Lyft: Down 9%
It may seem as if the country's second-largest ride-hailing service has been stuck in reverse since hitting the market in March, but it's actually been rolling forward since shifting into drive two months ago. The shares have risen better than 30% since bottoming out in mid-May. It's still a broken IPO, naturally, but it has come back from a much darker place.
Lyft is growing faster than the industry leader, and the trends are encouraging. Andy Hargreaves at KeyBanc issued a bullish note last week, arguing that customer growth and indexed spend were tracking ahead of analyst estimates through the first two months of the second quarter. He's neutral on the stock, but sees the market's near-term expectations for Lyft as reasonable.
2. Linx S.A.: Down 3%
One of this year's hottest stocks is a Latin American tech stock, but the market didn't take a shine to another Latin American tech company when it went public last week. Linx offers cloud-based enterprise software for Latin American retailers. It provides retailers with everything from business management tools to payment solutions on its evolving platform. It commanded a thick 41.3% share of the retail management software solutions market in 2017, according to industry tracker IDC.
Linx generates the lion's share of its revenue from retailer subscriptions to its suite of services, accounting for 87% of its gross revenue in 2018 -- rising to 89% in the first quarter of this year. The good news is that the growth here is healthy and steady. Recurring revenue rose 16% for all of last year, up 18% in the first quarter. Customers are happy, going by the 99.2% client renewal rate in its latest quarter. Linx S.A. has slipped since slightly since going public at $9.40 last week, but investors should come around if it's able to string together a few more periods of steady double-digit growth.
3. SciPlay: Down 14%
It's been more than two months since gaming and lotto tech specialist Scientific Games spun off SciPlay, its casual gaming app business that's growing faster than Scientific Games itself. The new offering opened 13% higher on its first day of trading, but that's also when it peaked.
Revenue growth slowed to 15% last year after soaring 31% in 2017, but accelerated to 21% top-line growth through the first three months of this year. SciPlay began 2019 with 2.6 million daily active users and 8.3 million monthly active users for its social casino apps. Gambling-related apps will always be risky, but it's hard to see why the market isn't cutting SciPlay some slack while growth is actually accelerating.
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