Week 9 Discussion COLLAPSE
Locate a recent story from The Wall Street Journal or other reputable news source about a company that has gone public through an Initial Public Offering (IPO) within the last year and review their S-1 filing. To locate this, search on EDGAR Company Filings or the investor relations section of their website. To avoid repetition, please find an IPO that other students have not discussed.
- How did the company arrive at the valuation for the IPO? Consider the various valuation methods covered in Week 4, supply and demand based on hype, and peer comparables.
- What was said publicly by the CEO/CFO and/or the bank that took the company public to support the initial stock price?
- Was the IPO price justified? How has the price changed since the IPO? Be sure to consider overall market and segment performance to support your position.
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.
1st person to respond to is
Hi Professor JP and Fellow Leaders,
My source this week is https://www.wsj.com/articles/poshmark-shares-make-public-market-debut-at-97-50-11610644004, and here are my answers to the three questions:
Week 9 Discussion COLLAPSE
How Did the Company Arrive at The Valuation for the IPO? Consider The Various Valuation Methods Covered in Week 4, Supply and Demand Based on Hype, And Peer Comparable.
Poshmark is a well-known retailer of feminine apparel and accessories. Initial Public Offering (IPO) pricing data reported by the Wall Street Journal (WSJ) put the company’s worth at over $3 billion at a price of $42 per share. Several elements contributed to the company’s skyrocketing worth. Market demands among community members were prioritized by the firm first; many Poshmark customers buy things to help them get to the top of social and professional circles. Second, the company deliberated the timing of its IPO in light of the fact that it had stopped buying business gowns and instead started stocking up on tie-dye and sweatpants. It was a gamble, but the firm won new clients and became more dominant in the fashion sector (Balasubramanian, 1).
Poshmark CEO Manish Chandra said the firm is well-positioned for expansion thanks to the market demand for its products. During his speech, he made the assertion mentioned above, arguing that the market swung in its favor when it began catering to consumers’ desires for more casual clothing and less reliance on stuffy suits. (“…when the need for buying work clothing… decreased, the marketplace… changed in that direction,”). This desire prompted Poshmark to set its IPO pricing (Gad, 2).
It is necessary to realize that the IPO price was justified for various reasons. Before the IPO pricing, the market for previously owned commodities like sweatpants and tie-dye saw a significant increase in demand. In addition, the firm benefited from a concentration on social commerce (Staff Writers, 3) since this allowed it to facilitate fruitful communications between customers and merchants through a built-in chat feature. The business could attract new consumers and increase its revenue by encouraging communication. With a net value of less than $1 billion, Poshmark has seen its stock price fall sharply since its IPO. Due to the dramatic increase in market demand, many potential investors are also unwilling to put their money into the company’s operations.
1- Kesavan Balasubramanian. 2022. What are the advantages and disadvantages of a company going public. Investopedia.
2- Sham Gad. 2021. How an initial public offering (IPO) is priced. Investopedia.
3- Staff Writers. 2018. Spotlight on: alternatives to the public market. IR magazine.
2nd person to respond to
Hello JP and fellow IPO analysts,
Today I am looking at a recent IPO from the Chinese distributor company Gigatech. The article implies the market has been in a drought of IPOs for a while, particularly from China. There is no S-1 as their current auditor is Chinese. That being said, given the above things, there is a general hype around an IPO (Bragg 2).
The CEO has mentioned that they are determined to stay in the US public market, even with the crackdown from both sides on Chinese companies doing so. Despite being based in China, Gigatechs profits are entirely outside the company. The CFO even went as far as to say that they are willing to change auditors if that will allow Gigatech to stay in the market past their current three-year limit. They seem keen to take advantage of the drought and reassure potential buyers that their stock will not just disappear.
And that has been rewarded. Gigatech initial offering was $15.69, which skyrocketed on the day to as high as $48. The stock has cooled since then, but even now is sitting at $17.
- Yang, J. (2022). China’s GigaCloud Goes Public in U.S., Bucking Delisting Trend. Retrieved 30 August 2022, from https://www.wsj.com/articles/chinas-gigacloud-goes-public-in-u-s-bucking-delisting-trend-11660841284?page=1
- Bragg, S. The CFO guidebook (4th ed.).