Tech investors, how’s your portfolio doing?
Tech IPOs have hit a fork in the road as the bull market turned bearish this year. CNBC found 55 tech companies that debuted through an IPO, a special purpose acquisition (SPAC) company, or a direct listing. Only one of them, GlobalFoundries, is less than 20% below its previous high price.
The remaining 54 companies are in bear market territory. A bear market is usually described as a price decline of 20% or more. And in the previous week, ten of those companies have fallen at least 20%. But an even worse piece of data, 23 of those companies have lost half or more of their market value since their highs. Why?
Rising inflation and the possibility of increased interest rates are wreaking havoc on companies that may need outside funding to expand. Investors are ditching the high-value, high-growth, money-losing companies and are putting their capital in less risky investments.
Employees at tech companies that haven’t yet made it through their post-IPO lock-up period, which lasts for six months after the offering, have been stung the hardest by the sell off. During the lock-up period, investors can’t sell any shares. For example, insiders at electric vehicle maker Rivian are locked until mid-2022, leaving them exposed to the company’s 35% plunge since mid-November.
The tech market’s plunge might affect the few remaining IPOs this year and potentially through 2022.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.