It’s been a record-breaking year for companies making their public debuts on Wall Street — and it’s only June.
Low interest rates and a boom in special purpose acquisition companies, or SPACs, often referred to as blank-check companies, have accelerated the IPO and direct-listing craze this year. Some of the high-profile companies to go public include Bumble, Coupang, ThredUp, Squarespace and Coinbase.
Mark Newton, president of Newton Advisors, says the race to go to market reminds him of one particular period in time.
“It’s really representative of a year typical to 1999,” Newton told CNBC’s “Trading Nation” on Wednesday. “In the whole ’90s, we saw about 5,100 IPOs. In the last two decades we’ve seen about 2,100, but that’s really started to accelerate in recent years.”
Like in the late ’90s, Newton says, the number of IPOs and the way in which large-cap IPOs have reduced appetite for smaller debuts could be a troubling sign.
“It represents a very frothy-type environment right now to think that we can bring forth all these IPOs when inflation is still a real problem with economic growth and we’ve seen over a 100% market rebound since last March,” said Newton.
But, Newton does see one of the recent market debuts as having potential.
“I’d look at Coinbase, which is a stock that I think will have opportunity but still needs to go a little bit lower before it’s truly technically appealing to me,” he said, highlighting a 50% retracement from its post-IPO high as a technical sign it may be close to bottoming out.
“I think the stock does have further to go on the downside. I would hold off on being too aggressive buying dips, but really anywhere down near $180 to $200 to me over the next four to six weeks would be a time to consider taking a stab,” he said.
Coinbase closed Wednesday at $228.05. It has fallen nearly 9% from its reference price set in April.
Delano Saporu, founder of New Street Advisors, names Squarespace as his top pick among the newly public companies.
“There’s a lot to be seen about what management does over the next few quarters, but if you’re following that trend of e-commerce, they have sticky subscription revenue, and that’s going to continue to grow when you’re having more medium-sized and small-sized businesses and owners and entrepreneurs coming to the market and coming to the forefront. That’s a play with a company that I like and watch, and hopefully they can grow into their valuation,” Saporu said during the same interview.
Squarespace is one of the most recent debuts, trading for less than a month. It is up 20% since that direct listing.
“On the other side, Bumble … has been beaten up by the market, I think a lot of it for good reason,” said Saporu. “It has a freemium model but also they upsell when it comes to some of the different products and things on their platform, which is definitely tough in a very competitive dating marketplace, with Match Group leading the way there.”
Bumble, which went public in February, is up 14% from its IPO price of $43 a share. Its competitor, Match Group, owns popular dating sites such as Tinder and OKCupid.
