With apologies to Charles Dickens, we are witnessing a tale of two IPOs and it remains to be seen if it will be the best of times.
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Late Tuesday, Peloton Interactive — a leader in the fitness on-demand workout and its high-end exercise bikes, said it is planning to raise up to $1.33 billion in its upcoming IPO. The company expects to offer 46 million shares priced between $26 and $29 per share, according to its latest filing with the Securities and Exchange Commission.
Conversely, WeWork, the office-sharing company, is still planning an IPO roadshow next week after batting down reports that one of its major investors, Softbank, wanted to scuttle the IPO. This news came just one day after The Wall Street Journal, citing sources familiar with the matter reported that the stock offering could fall below $20 billion — a dramatic drop from its $47 billion valuation that was raised through private capital this year.
"I can’t recall a time when a company has cut their value by 50 percent," Brian Hamilton, founder of HamiltonIPO.com and the Brian Hamilton Foundation told Fox Business. "It’s up in the air right now. It’s a very strange thing. None of us know.”
The woes facing WeWork come on the heels of a report on IPOs from Goldman Sachs that stated, “Most IPOs underperform, but some new offerings outperform dramatically.” That may be a good omen for WeCompany, the WeWork parent company and Peloton, but Hamilton believes investors need to be cautious if faced with an IPO opportunity.
“People are positively looking at IPOs more carefully. There needs to be more concern,” Hamilton said, “I can’t predict a financial asset that is more difficult to predict than IPOs.”
Indeed, Goldman’s look at IPOs since 2010 shows the median IPO stock has trailed behind the Russell 3000 by 28 percent over their first three years of trade. The Russell 3000 index tracks the performance of the 3,000 largest U.S.-traded stocks.
“An investor that purchased $100 of every US IPO completed during the past 25 years would have generated a 0.6 percentage point annualized excess return versus the Russell 3000 index,” Goldman analyst David Kostin wrote in the report, “In contrast, the typical IPO completed during the same period has lagged the market during the first 12, 24, and 36 months as a public company.”
As WeWork hits the road Monday to talk up its offering to potential investors, Crain’s New York Business reports that Peloton will follow suit on Wednesday.