IPO Outlook: Biggest losers of 2019

As US stocks continue to improve following last week’s ‘phase one’
trade deal between the world’s largest economies, China and the US, some newly-listed
unicorns are struggling to stay afloat. But investors continue to buy IPO shares,
hoping the tide will change next year.

In an interview with the Business
Insider, Aram Green, who manages the ClearBridge Select Fund and several other
ClearBridge funds said: “We just don’t see a lot of downsides where these
stocks are trading at now, and we have an opportunity to make 50% to 200% on
our capital that we’re putting to work today if we take a multiyear time
horizon.”

Some of
Green’s top stock picks include retailer of teeth straightening equipment SmileDirectClub
Inc. (SDC), ride-hailing company Lyft Inc. (LYFT), and B2B software company Dynatrace Inc.

Lyft and SmileDirectClub have been trading below IPO price while
Dynatrace has jumped nearly 52%. The largest ride-hailing firm Uber is down 38%,
while Slack fell 14% below IPO price.

WeWork, one of the renowned tech unicorns, was set to hit Wall
Street this year but its IPO failed
to kick off. However, the workspace company’s biggest shareholder Softbank is
said to be working round the clock to see the company go live.

One of Mr Green’s recent successful bet includes online used-car
retailer Carvana Co. Carvana’s issue price was $15 back in 2017 but today, the
company’s shares are trading above $90 at the NYSE. But during the first few months
of trading, the firm plunged to settle below $10 per share, before taking a steady
rise.

“There
was a lot of scepticism over the model being profitable, whether it could
actually be a sustainable business,” said Green, adding that he’s now enjoying
a total gain of about 700%, just two years on.

While he
agrees that Lyft is currently burning investors’ cash, he remains optimistic
that the US ride-hailing sector is still growing and will become less
competitive once the market solidifies behind the two most significant players,
Uber and Lyft.

But the head
of global macro strategy at INTL FCStone Vincent Deluard is one of the biggest
sceptics of the IPO market. In his opinion, he mostly sees “trouble” in the IPO
market, including tech-backed stocks that are set to disentangle.