There's starting to be lots of push back on initial public offering (IPO) pricings. Investors want to make money rather than just spend it. Given that IPO returns have been weak since the debut of Alibaba, investors are now demanding price cuts.
You can see that effect on market action in the last few new offerings.
Of the 20 IPOs priced since Alibaba, the average price is up only 3.9 percent from the initial price, according to IPO ETF manager Renaissance Capital. Half are trading below their IPO price, including some that got a lot of attention:
Attento down 25 percent
Travelport down 7.7 percent
Vivint Solar down 13.9 percent
Fairmount Santrol down 7.0 percent
Look at MOL Global (MOLG), the largest e-payment enabler for Southeast Asia, which is basically the region's version of Alipay or Paypal. MOL priced 13.5 million shares at $12.50, and it was 19.5 m shares at $12.50–$14.50. The deal went from $263 million at the midpoint to $169.9 million!
Take a hot space—energy and Master Limited Partnerships (MLPs). USD Partners (USDP), an MLP for energy rail terminals, priced 9.1 m shares at $17, slightly more than the 8.9 million shares expected, but well below the price talk of $19–$21—even with a 6 percent yield in a hot space!
Separately, OM Asset Management (OMAM), an asset management company, priced 22 million shares at $14.00, below the expected range of $15-$17.
To be sure there are some winners: Yodlee, Citizens Financial, Wayfair are all up slightly. Overall, however, the IPO market is clearly in push-back mode. And that is healthy.
There is one winner today in IPO land: HubSpot (HUBS) raised 5 million shares at $22–$25, well above the price talk earlier this week of $19–$21, and even above the most recent price talk of $22–$24. This is cloud-based marketing: the current hot term is "inbound marketing."
Here's the way it works: the old way to do marketing is, say, to run advertising on cable television. The new way of marketing is to write a blog post and drive people to your site, preferably using social media. It's a management problem, requiring some automation software. You have to interact with customers' email, websites, social media.
You want to be able to analyze the data, and be able to answer the question: is it effective if I do this Twitter campaign? Or if I write this blog? That's what HubSpot does.
Their competitor, Marketo was up 77 percent on day one of its IPO on May 6, 2013; up roughly 165 percent since it went public.
CORRECTION: Marketo is a cloud-based marketing company based in San Mateo, California. Its name was misspelled in an earlier version of this article.