Mixed results in the latest batch of IPOs, but the market is opening up

Published Thu, Jun 29 20239:54 AM EDTUpdated Thu, Jun 29 20231:19 PM EDT

There are mixed results in the latest batch of initial public offerings. Following on the successful IPO of Korean barbecue chain GEN Restaurant Group on Wednesday, three big IPOs priced last night and will trade on the New York Stock Exchange on Thursday. The clear winner is Savers Value Village (SVV) , the largest for-profit thrift operator in the U.S., which priced 22.3 million shares at $18, well above the price talk of 18.75 million shares at $15 to $17. Kodiak Gas Services (KGS) , a natural gas compression company, priced 16 million shares at $16, below the price talk of $19 to $22. Fidelis Insurance (FIHL) , a specialty insurance and reinsurance provider, priced 15 million shares at $14. That was not only below the price talk of $16 to $19, but the 15 million shares offered were below the projections of 17 million shares. Why Savers Value Village is the winner among the three These three companies collectively were seeking to raise about $900 million. It may have been a bit much for IPO investors to digest, but a closer look indicates these are three specialty companies appealing to different investors. It's not a surprise Savers Value Village upsized the deal. As I noted Wednesday, the deal ticks a lot of boxes : Savers Value Village is profitable and growing. Thrift is cool: It's embraced by not just thrift shoppers, but it's also growing fast among younger people who prize "vintage." There's an ecology angle: You've heard of the massive amount of food that is thrown out in this country. The company is capitalizing on the massive amount of clothes that are thrown out. There's an artificial intelligence angle: Data analytics help it sort out products and improve pricing. There's a recession angle: The business is growing regardless of the economy, but it would make sense it would grow even more if a recession occurred. What does it all mean? The IPO market is reopening, but cautiously All three serve different investor bases, each with its own outlook, Santosh Rao at Manhattan Venture Partners told me. Savers Valley has a good outlook given that consumers are buying down. Thrift is the operative word. Gas (Kodiak) and insurance (Fidelis), the other two companies, are facing a tougher economic outlook and their public peers are trading down. The simple fact that all three deals got done is a sign the IPO market is reopening after being largely closed for 18 months. But the mixed pricing today indicates we are not in an IPO bull market. Sellers are not able to name their price and investors will pay anything. This is good news for buyers of IPOs. IPOs may be entering a period where the deals get done, but they are priced the way the buyers wanted them to be. These deals tell me buyers are very focused on valuation and what they want to pay. The IPO market is reopening, but with a strong reality check from the customers. July doldrums are upon us, but maybe not for IPOs What's next? Trading volumes traditionally drop in July and August, and so does IPO activity. The traditional mantra is, if the IPO doesn't get done by July 4, it waits until after Labor Day. That may not be the case this year. With several large IPOs already launched in June, the market may stay open in July. One potential candidate is Oddity Tech, which sells branded beauty and wellness products to consumers worldwide and has already filed to go public. But we are still waiting for some of the larger IPO candidates to make announcements, such as Reddit, Instacart, Panera Bread, Stripe, Impossible Foods, Fanatics, StubHub, Klarna and ARM. If any of those set firm dates for an IPO, that will be the signal the IPO market is getting back to normal, even if prices are more favorable to buyers.