Beware of These 4 Recent IPOs That Have Plunged More Than 40% Since Listing

The total exit value of United States’ public listings surpassed$1 trillion after the automotive company Rivian Automotive Inc. (RIVN) went public in November. The figure, while emphasizing the market’s warm reception for recent initial public offerings (IPOs) and…

other new entrants, also underscores concerns about the disconnect between the valuations and fundamentals of these companies, which lack historical data.

Market bull Jim Paulsen of the investment management firm Leuthold Group has predicted a 10% to 15% market correction due to high valuations and federal policies becoming less accommodating. In addition, smaller companies are bearing the brunt of the recent market swings.

Given this scenario, we think it might be best to avoid the recent IPOs of companies with weak fundamentals, such as DiDi Global Inc. (DIDI – Get Rating), Toast, Inc. (TOST – Get Rating), Full Truck Alliance Co. Ltd. (YMM – Get Rating), and Marqeta, Inc. (MQ – Get Rating). These stocks have plunged more than 40% in price since listing. Furthermore, DIDI plans to withdraw from the New York Stock Exchange due to Chinese regulatory pressure.

DiDi Global Inc. (DIDI – Get Rating)

DIDI is a mobile technology platform that provides ride-hailing, taxi-hailing, hitch chauffeur, and other shared mobility services and enterprise business ride solutions. The company, which is headquartered in Beijing, China, went public in a traditional IPO by listing its American Depositary Shares (ADSs) on the New York Stock Exchange on June 30, 2021.

On July 12, DIDI announced that according to a statement by the Cyberspace Administration of China (CAC), 25 of the company’s operative apps in China would be taken down because they were collecting personal information in direct violation of relevant laws and regulations. The app takedowns are expected to adversely impact the company’s revenue.

In response to the apps takedown, The Schall Law Firm has filed  a class-action lawsuit against DIDI for violation of federal securities laws, alleging false and misleading statements to the market. The company is also facing class-action lawsuits from notable law firms Labaton Sucharow LLP, Kahn Swick & Foti, LLC, and Levi & Korsinsky, LLP.

For the three months ended March 31, DIDI’s total costs and expenses increased 105.2% year-over-year to $7.45 billion. Its net cash used in operating activities rose 105.8% from the prior-year quarter to $937 million. And its net cash provided by investing activities came in at a negative $307 million, down 147.6% from the same period last year.

Analysts expect DIDI’s EPS to be negative $0.09 for the current year (fiscal 2021).

The stock has declined 52.8% in price since it went public on June 30 and 13.7% over the last five days to close yesterday’s trading session at $6.67.

This bleak outlook is reflected in DIDI’s POWR Ratings. The stock has a Momentum and Quality grade of D. In the 169-stock Software – Application industry it is ranked #105. The industry is rated F. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Click here to see the additional POWR Ratings for DIDI (Growth, Value, Stability, and Sentiment).

Click here to check out our Software Industry Report for 2021

Toast, Inc. (TOST – Get Rating)

TOST in Boston, Mass., is a cloud-based technology platform that operates in the restaurant industry in the United States and Ireland. Its offerings include Toast Point of Sale (POS), Toast Order & Pay, Toast Flex, Toast Go, and Toast Tap. The company went public in an IPO on the New York Stock Exchange on September 22, 2021.

On November 16, TOST unveiled new products aimed at helping restaurants adapt to digital transformations and access sales faster alongside managing takeouts profitably. However, it might take some time before the company realizes its expected gains from this development.

TOST’s net loss and net loss per share attributable to common stockholders increased…

 

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