Instant messaging and video app Snap fell to its IPO price of $17 in what may be a warning sign for future IPOs.
Snap went public at the NYSE with great fanfare on March 2 at $17 and hit a high of $29.44 the day after. It gapped down when it reported slowing revenue growth and slowing user growth in its first earnings report as a publicly traded company on May 10.
Dropping to its IPO price is "not a good sign for future IPO activity," according to Kathleen Smith, who runs Renaissance Capital, which provides research on IPOs and runs the Renaissance Capital IPO ETF, a basket of the last 60 publicly traded IPOs.
"IPO investors are already cautious about valuations. Now they are going to be even more cautious," she told me.
Should Snap drop below its IPO price, it would not be unprecedented. Smith noted that Facebook had a chilling effect on the IPO market when it dropped below its IPO price right after it went public in 2012, though it turned around a year later.
After a promising start this year, IPO activity has again slowed. Smith said this is despite the fact that "we are in a perfect storm for IPO activity," noting that IPO after-pricing has been strong and the markets are at new highs.
Should Snap trade below its IPO price, it will be an issue for future IPOs. "It's not a good advertisement for tech unicorns" that are waiting to go public, one trader noted to me.
Next week, Altice, one of the largest broadband communications and video services providers in the United States, is set to go public by raising 46.6 million shares priced between $27 and $31, a $1.35 billion offering at the midpoint.
Others, include meal delivery service Blue Apron, are also expected to go public soon.