Those once promising unicorns are starting to look like a bunch of wounded animals. Highly anticipated companies such as Lyft (LYFT), Uber (UBER) and Slack (WORK) are down from their IPO price. SmileDirectClub (SDC) alone fell 28% on its first day of trading.
While there have been a few success stories this year such as Beyond Meat (BYND), struggles from companies like WeWork are showing the difficulties in the IPO market. If you’re looking for a company to pop on its first day of trading, there’s one sector you should be on the lookout for, according to EY's Americas IPO expert, Jackie Kelley.
“Tech gets the first day pop. There’s a lot of energy, a lot of these are brand names in the market. That said, I do think investors will be discerning,” she said. “They go through cycles … the tides are turning and profitability is going to be really important.”
IPOs will have to do some major work in order to make up for a lackluster 2019, though. According to EY, 2019 has the lowest number of IPOs and proceeds from those IPOs this decade, with only three more months in the year left.
Still, better times may be ahead.
“[IPO Companies] look at these market blips just like they look at themselves and say, ‘What do I need to do to be public, let me work through the things and challenges I have every day. I’m a high-growth company,’” Kelley says. “Some of these companies are growing 10%, 20%, 50%, some of them 100% year-over-year. They’re fearless. Blips in the market don’t scare them at all.”