Investors love that new-stock smell, but buying into an IPO comes with unique risks and challenges. Many promising companies have a lot to prove when they make their market debuts, and when they stumble out of the gate, it’s not pretty…
I took a look at some hot IPOs to put on your watch list earlier this week. Now let’s look at some debutantes from the Class of 2020 that have flopped. Casper Sleep (NYSE:CSPR), Root (NASDAQ:ROOT), and BlueCity Holdings (NASDAQ:BLCT) are all trading lower than their IPO price tags, but they may not stay broken for long if positive catalysts play out in the year ahead. Let’s see why Casper Sleep, Root, and BlueCity can get it right the second time around.
When you’re a leader in consumer-direct mattress retailing, it’s only poetic that you should have a sleepy IPO. Casper Sleep was initially hoping to price its IPO between $17 and $19, but underwriters were only able to take it public at $12. The stock has been cut in half since its February debut.
Revenue rose 43% in 2018, slipping to 23% growth last year. This year has been ugly. It exited its European operations in the second quarter. Consolidated revenue dipped 3% in the third quarter despite the company increasing its store count to 65 by the end of September.
The market doesn’t like when you hit the ground stumbling. It also doesn’t help that folks spending more time at home in the new normal are looking to upgrade their mattresses. At least one trendy rival posted double-digit top-line growth for its third quarter.
The bullish argument for a turnaround is that pessimism is already priced into the shares. Casper Sleep would have to double at this point to get back to its IPO price. The third quarter also appears to be a fluke. Its $132 to $142 million target for the current quarter represents single-digit consolidate growth and a double-digit increase for its North American business.
One of this year’s hottest IPOs is a high-tech player attempting (unsuccessfully, thus far) to disrupt the insurance market. Root Insurance prides itself as the country’s first licensed insurance carrier powered entirely by mobile. It uses data and technology to determine car insurance rates, not just traditional markers like credit scores.
Root hit the market at $27 last month, above its initial pricing range of $22 to $25. The stock has dropped to…
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