People wait in line for t-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street after the company went public with an IPO earlier in the day on July 29, 2021 in New York City.
Spencer Platt | Getty Images News | Getty Images
This year’s bull market in tech IPOs has turned into a bear.
The recent downdraft in shares of high-valued, high-growth, money-losing businesses has led to an outsized selloff in companies that hit the market in 2021. CNBC identified 55 tech companies that debuted in the U.S. this year through an IPO, special purpose acquisition company or direct listing. Only one of them —— is less than 20% off its high price.
That means the rest are in bear market territory, typically defined as a drop of 20% or more from their peak. Ten of those companies have slid by at least that much in just the last week.
Even worse, 23 of those companies have lost half or more of their value since reaching their highs, including, which has plummeted 74% from its top in early August, and , which has plunged 58% since peaking in July. All prices are as of Monday’s close.
Investors choosing a basket of offerings in the hope of building a diversified portfolio haven’t found any safe havens. The, which tracks stocks of companies to go public in recent years, has fallen 18% in the past three weeks and is down 26% from its record in February. The index’s are , , and .
Across the tech sector, rising inflation and the threat of higher interest rates are battering companies that will require additional outside capital to subsidize growth. In investors’ flight to safety, the people being hit the hardest are employees and other insiders at the companies that haven’t yet made it through their post-IPO lock-up period, which typically lasts until six months after the offering.
insiders, for example, are locked up until mid-2022, leaving them fully exposed to the 35% drop in the electric vehicle maker’s stock since mid-November. , a competitor, is down 50% from its high last month, and insiders there are forbidden from selling until early next year.
Cloud software vendor, down 35% from its November peak, is also scheduled to hit its lock-up expiration in early 2022. The news worsened for GitLab employees on Monday, when the stock sank an additional 9% in extended trading. GitLab reported better-than-expected revenue in its first quarter as a public company, but that didn’t seem to matter.
For some newly public companies, lock-ups aren’t an issue. A half-dozen U.S. tech companies this year went public through a direct listing, allowing existing investors to sell right away rather than adding cash to their balance sheets.
While still used by a small minority of venture-backed companies, direct listings gained significant traction this year. Prior to 2021, only four notable companies —, Slack, and — had chosen that path to the public market.
This year,, , , , and debuted via direct listings. Shares of each are down between 20% and 50% from their highs, but employees have had the ability to sell their vested stock on the open market from day one, cashing in on at least some of their gains.
Tech SPACs have been just as problematic for public investors as IPOs and direct listings. Auto insurer, whose technology allows drivers to pay by the mile rather than a monthly fee, has seen the steepest plunge of the IPO group, dropping 89% from its high in February, shortly after the was completed.
Among other SPAC listings, neighborhood social networkis 47% off its November high, and online lender has dropped 44% in 10 months. Media site wasn’t included in the data for this story as the company just completed its SPAC merger on Monday. But it was a troubling start, with the in its opening day.
The repricing of the tech market could have an impact on the few remaining IPOs this calendar year, and possibly into 2022.
HashiCorp is scheduled to go public this week, and the cloud infrastructure software company is, based on its initial pricing range. However, those expectations were set last week, before the tech market cratered, and investors may now pay closer attention to the company’s $22 million loss in the latest quarter, which widened from $9.3 million a year earlier.
Next week, Samsara, whose technology connects physical products to the cloud, is set to debut with a valuation of about, according to its published Monday. Samsara’s loss narrowed to $32.4 million in the most recent quarter from $54.3 million in the year-ago period.