Unity software (NYSE: U) It made its public debut on Friday, the latest in a string of high-profile Initial Public Offerings (IPOs) this week involving tech companies. The stock initially jumped more than 46% from its final offering price, in a scene that was played with each of its peers this week.
The video game engine specialist previously priced his shares in the range of $ 34 to $ 42, but in light of substantial interest by investors, raised the offering price from $ 44 to $ 48. Unity eventually raised the initial stock price to $ 52, up 37% from its initial range midpoint, on the eve of its IPO, and the company could ask for more. The stock rose more than 35% to $ 70 per share at the start of trading, and closed its trading day at $ 68.88, up 32% from its opening price.
What a long, strange journey
Unity Software adopted a different route than dictates, the standard IPO practice for public markets. In most instances, the pricing and allocation of shares among institutional investors is the job of hired investment banks to handle the IPO process. Unity’s management, however, wanted a bigger hand in the process.
Reports suggest that there was a tussle between CEO John Ricetillo and the company’s upper management in an attempt to raise money to be raised from the company’s IPO. Ekta sent missiles to institutional investors stating how many shares they want and what they are willing to pay – even encouraging them to enter their bid. Once all offers were submitted, Ekta’s management fixed the IPO price based on demand and allocated shares among bidders above the final price.
By doing so the company hoped to increase what it had paid for its shares while reducing the first day’s pop. Depending on the performance of the stock, however, things did not work very well and at the same time Unity’s management hoped.
Red-hot IPO market this week
Whenever someone uses the phrase “red hot”, it’s usually hyperbole, but based on the slate’s performance of this week’s IPO, it was a fitting description. There were no five high-profile IPOs this week, and each lived up to pre-trading promotions.
Snowflake (NYSE: Snow) Debut began to rumble on Wednesday and it was the undisputed bell of the ball. After raising its IPO price range, data warehouses and analytics experts were eventually 50% higher than initially planned, and even that was not enough to contain investor enthusiasm. The stock doubled from the gate and closed its first-day trading at 113% to $ 255, making it the largest IPO in software history.
JFrog (NASDAQ: FAROG) There was an impressive performance when he made his debut on Thursday, though not to the extent of Snowflake. JFrog, which helps companies manage their software updates, was forced to raise its IPO price range even after investors showed significant appetite for shares. It eventually raised the price of its shares by 26% from the midpoint of the original range, but the stock gained 47% to $ 64.79 before ending the day at $ 71.
While it certainly did not get the same level of publicity, Sumo logic (NASDAQ: SUMO) When it debuted on Thursday, there was no shortage. After initially pricing their shares in the $ 17 to $ 21 range, real-time data analysis experts eventually settled on $ 22. The stock rose 22% in the open, and closed during the whole day’s trading, at $ 26.88, an increase of 22%.
American well (NYSE: AMWL) First day in public markets was healthy. The telemedicine provider initially priced its shares in the range of $ 14 to $ 16 per share, but due to healthy demand, it rose to $ 18. The stock strengthened on Thursday, 42% above the IPO price, ending the day at $ 23, up 28%.
Is this IPO driving fever?
The onset of the epidemic led to a shift in remote work and a distributed workforce, which highlighted the benefits of software as a service (SaaS) and cloud computing, making companies providing these services hot objects. It could also have the effect of affecting private companies that were considering going public to expedite their plans to extend their IPO timetable in a hurry to gold.
While there is a clear attraction to coming to the ground floor, investors should consider the additional risks associated with buying a stock on their IPO or shortly thereafter. It includes a small track record and paying a significant premium for a company yet to prove itself.