All Four Recent Blockbuster Debuts Are Now Trading Below Debut Price

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Shares of automated marketing firm Klaviyo closed below their initial public offering price for the first time in the stock’s brief history, becoming the latest high-profile IPO to fall flat in an unfortunate sign for the newly reactivated market.

Key Facts

Klaviyo stock dipped more than 4% to $29.03, trading below its $30 IPO price and far short of its intraday high of $39.47 notched during its New York Stock Exchange entrance on September 20.

Klaviyo was one of four multibillion-dollar firms to go public in September and October, testing the waters alongside British chip designer Arm, German sandal hawker Birkenstock and San Francisco-based grocery deliverer Instacart.

After its latest slump, Klaviyo now joins its peers in trading below their respective IPO prices: Arm’s $48 share price Friday was 12% below its $51 IPO price, Birkenstock’s $39 ticker is 15% less than its $46 opening price and Instacart’s $25 share price is 17% its $30 IPO price.

And in perhaps an even more dire sign of the Wall Street neophytes’ prospects, the quartet’s losses compared to their debut intraday highs are even steeper, as Arm is down 30% from its peak, Birkenstock 9%, Klaviyo 27% and Instacart 42%.

Key Background

The last six weeks marked the hottest stretch for IPOs in two years, headlined by Arm, whose $54.5 billion initial valuation made it the largest company to go public since electric vehicle maker Rivian in November 2021. The string of IPOs brought some hope that the IPO market would shake off its dreadful 2022 and first half of this year and inch back toward 2021’s record-setting levels, in what would be a particularly welcome sign for investment banks grappling with the downturn in dealmaking revenue. Klaviyo’s IPO minted two billionaires, cofounders Andrew Bialecki and Ed Hallen, with Bialecki and Hallen retaining unusually high 38% and 13% stakes in their company even after going public. E-commerce giant Shopify owns about 10% of Klaviyo.

Contra

Analysts have an average price target of $39 for Klaviyo, according to FactSet, implying about 35% upside. Arm’s $62.59 average price target and Instacart’s $35.23 average price target are more than 30% above their respective Friday share prices. FactSet has no price targets for Birkenstock at this point due to the stock only debuting last week.

Crucial Quote

“When you’re the first one out after a 20+ month software IPO drought, there’s an elevated quality threshold that needs to be met for success,” Canaccord Genuity analysts led by David Hynes wrote in a note to clients this week initiating coverage on Klaviyo with a buy rating, hinting at the firm’s recent slump.

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