Just when investors looked set to embrace newly public tech companies, the Fed’s “hawkish hold” interrupted the romance.
Arm Holdings Plc dipped below its IPO price in early trading, headed for a fifth straight decline that have wiped out nearly a quarter of its value from the peak. A day earlier Instacart briefly dipped below its debut price. While the shares stabilized Thursday, they sit about 28% below a high set two days ago. Klavioyo Inc. was also little changed, but well off levels hit during its debut yesterday.
The higher-for-longer mantra is a brutal refrain for fledgling companies that need cash to expand and whose valuations are predicated on the prospects for big profit growth years into the future. For dealmakers looking to cash in on what looked like strong demand for IPOs, the fading stock prices may push would-be public companies to re-consider the timing for potential debuts.
The early success of the three IPOs seemed to signal a revitalization of a market that had gone virtually dormant for two years. They raised a combined $6.5 billion in the past week. All told, just $21.4 billion has been raised this year, roughly in-line with last year’s paltry haul through the same period. That’s down 92% from 2021’s banner year, data compiled by Bloomberg show.
It’s not just newcomers that are under pressure. The Nasdaq 100 has fallen 2.5% since Powell spoke about 19 hours ago. A Goldman Sachs Group Inc. basket of profitless tech companies is down 5.6%. The 10-year Treasury yield has spiked as high as 4.49%, the highest level since 2007.