Instacart and Klaviyo Inc., reacting to the strong reception of this year’s biggest IPO, have increased the amount of money they want to raise, with the goal of bolstering their cash positions while driving an opening day pop.
(Bloomberg) — Instacart and Klaviyo Inc., reacting to the strong reception of this year’s biggest IPO, have increased the amount of money they want to raise, with the goal of bolstering their cash positions while driving an opening day pop.
The first test comes Monday with the pricing of online grocer Instacart’s initial public offering, which may raise as much as $660 million. Klaviyo, a marketing and data automation provider, may follow suit this week, targeting up to $557 million.
The debuts aim to continue a recent trend of IPOs that generate buzz and strong gains in their first day of trading after an 18-month-long dormant market. Arm Holdings Plc jumped 25% last week after the biggest US IPO since November 2021.
Even with Instacart and Klaviyo’s higher targets, Wall Street still sees the valuations as modest, with bankers coaxing companies to meet would-be investors at prices seen as attractive.
“Both deals came to market with a proposed range below their last private round,” and their new ranges are still below that level, said Matthew Kennedy, senior IPO market strategist at Renaissance Capital. “An attractive valuation, low float, pent-up demand, it’s clear the syndicate was very cautious bringing these to the market at the original range.”
Of the 10 companies that raised more than $300 million through IPOs on US exchanges since May, the median stock generated a 26% climb on the first day, data compiled by Bloomberg show. That’s serving as a signal that investors are getting the action they want, while companies can get much-needed deals done.
Another driver of those gains has been the use of cornerstone investors and smaller pools of shares available to trade. Both strategies were used in deals like Arm Holdings, Cava Group Inc.’s $365 million offering and Savers Value Village Inc.’s $401 million IPO. All three jumped roughly 25% or more on day one.
A strong opening session, however, hasn’t been a signal of steady strength in the weeks and months that follow, something investors are keeping an eye on. Arm has slipped almost 12% over two days, though it’s still up 10% since going public. Savers has trimmed its gains from a late June debut to a 9.9% advance. For Oddity Tech Ltd., a 36% rally on its its first day has been for naught with shares now trading 6% below the IPO price.
All told, for the 12 companies that have raised more than $300 million in US IPOs this year — excluding blank checks — just five are trading higher than where they closed on their opening day.
That could keep the reopening of the IPO market more measured through the end of the year. Just $20 billion has been raised through IPOs on US exchanges this year, a roughly 8% drop from the year before and a plunge from 2021’s record year, data compiled by Bloomberg show.
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