Klaviyo, Arm, and Instacart face doubts about their IPO revival.

Klaviyo, Arm, and Instacart face doubts about their IPO revival.

IPO Market Faces Challenges as Klaviyo Shares Struggle

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New York, Sept 20 (ANBLE) – Klaviyo, a marketing automation firm, experienced a disappointing debut in the stock market as its shares closed below their first-day high. The underperformance of Klaviyo, coupled with the slump in the stocks of Arm Holdings and Instacart, has raised doubts about the potential revival of the new listings market.

The recent high-profile IPOs have shifted investor focus back to the market, which had seen an 18-month dry spell. However, some investors and market participants believe that the current environment may not be favorable for offerings due to high interest rates and recent declines in the broader U.S. stock market.

Despite the optimism from investment bankers touting the success of Arm and Instacart’s IPOs, the reality on the street suggests that this may not be the greatest time for companies to go public. Robert Pavlik, senior portfolio manager at Dakota Wealth, commented, “The Street is telling them, hey, this is not the greatest environment.”

Other companies, such as German premium footwear maker Birkenstock Holding and Vietnam internet company VNG Corp, have been preparing for their own listings on the U.S. stock market.

One of the major concerns in the market is the falling stock prices of Arm and Instacart. Arm, a chip designer, nearly touched its IPO price of $51, closing at $52.91, down 4.1%. Instacart, a grocery delivery app, dropped to $29.96, below its $30 IPO price, and ended the session at $30.10, down 10.7%. Klaviyo also struggled to maintain its initial gains, hitting a low of $30.26, just above its $30 IPO price. The stock closed at $32.76, up 9.2%.

Adding to the market uncertainty, all three major U.S. stock indexes ended lower on Wednesday. Federal Reserve Chairman Jerome Powell’s warning about the battle against inflation not being over raised concerns among investors about high interest rates. The Nasdaq, in particular, has declined more than 2% in the past week.

Jake Dollarhide, CEO of Longbow Asset Management, noted that the tech trade is being sold off as investors look to rotate into sectors like oil that have not performed well previously.

Short sellers have also been targeting Arm, as seen in the increasing number of shares on loan. Data and analytics company Ortex reported that there were 8.83 million shares on loan, representing about 5% of the stock’s free float, compared to 5.12 million shares on loan, or 2.7% of the stock’s free float, just a day earlier. Ortex stated that there is usually a close relationship between shares on loan and shares being shorted.

Volatility is common among newly-listed companies, especially those with low floats like Arm, which listed about 10% of its total shares. Peter Tuz, president of Chase Investment Counsel, pointed out that some investors may sell the stock for quick profits after a day or two, as the stocks establish a base.

Despite the enthusiasm surrounding these IPOs, concerns about high interest rates persist, particularly in growth sectors. Investors are starting to question whether the current economic conditions can sustain the elevated valuations of these IPOs, according to Mark Luschini, chief investment strategist at Janney Montgomery Scott.

In conclusion, the recent struggles of Klaviyo, Arm, and Instacart in the IPO market have cast a shadow over the anticipated revival in new listings. The combination of high interest rates and declines in the broader stock market has made it a challenging time for companies to go public. However, volatility is not uncommon for newly-listed companies, and short-term fluctuations should not overshadow the long-term potential of these businesses. Investors will closely monitor how the IPO market evolves and whether it can regain its momentum in the coming months.

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