IPO Watch: Experts say focus on fundamentals, not hype, after IPO debuts of Arm and Instacart
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Instacart (NASDAQ:CART) made its Nasdaq debut on Tuesday, closing 12% higher after surging by 40% earlier in the day – valuing the grocery delivery app at US$11 billion.
Last week, chip designer Arm Holdings (NASDAQ:ARM) made its stellar debut at $US54.5 billion.
The other big IPO was US software maker Klaviyo (NYSE:KVYO), which jumped 32% on its debut last night.
Boston-based Klaviyo is a marketing-automation software company that helps e-commerce players manage and optimise their marketing efforts. Klaviyo’s market cap closed at around US$11 billion.
This latest run of listings has been good for the market, propping up an IPO industry that’s been struggling to produce big tickets over the last couple of years.
But experts warn that investors shouldn’t get ahead of themselves and still focus on the fundamentals – because despite the hype, these companies will still have to face uncertain economic times in the foreseeable future.
“I think that with some of the recent IPOs, you’ve seen a lot of excitement and a lot of pent-up demand for quality tech IPOs,” Renaissance Capital’s Matt Kennedy told Yahoo Finance.
“And sometimes that can mean an initial pop that is maybe well above what the intrinsic valuation should be.”
As for Instacart, Morningstar analyst Ali Mogharabi said that investors should keep in mind that Instacart isn’t the only player in the online grocery game.
“Their service is not necessarily unique,” Mogharabi says, pointing to companies like Uber, DoorDash, and even Amazon.com, which has its own grocery delivery service.
“There’s a lot of competition out there, especially from very, very large companies.”
Instacart itself has issued a warning in its IPO filing documents that the profitability the company generated in FY22 is new, and could evaporate if it can’t maintain revenue in the months to come.
And for Arm Holdings, asset manager Bernstein has initiated a coverage on the chip designer with an ‘Underperform’ rating.
“While expectations that Arm will be a beneficiary from AI growth may be adding a premium to the share price, we believe it is too soon to declare them an AI winner,” wrote Bernstein analyst Sara Russo.
“With the mobile end market maturing, we think expectations for top-line growth are too optimistic.”
Bernstein has a price target on Arm Holdings of US$46, versus the current price of US$55.
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|Code||Name||IPO Price||Current Price||Return||Market cap||Listing date|
|JBY||James Bay Minerals||0.20||0.41||103%||$13,140,225||12/9/2023|
|ACM||Aus Critical Mineral||0.20||0.37||85%||$11,297,875||3/7/2023|
|GDM||Great Divide Mining||0.20||0.28||40%||$7,630,000||25/8/2023|
|NVO||Novo Resources Corp||0.20||0.23||15%||$8,062,500||11/9/2023|
|LM1||Leeuwin Metals Ltd||0.25||0.27||8%||$12,091,950||29/3/2023|
|CVB||Curvebeam Ai Limited||0.48||0.43||-10%||$80,460,158||23/8/2023|
|ASK||Abacus Storage King||1.41||1.12||-20%||$1,484,936,347||1/8/2023|
|SQX||SQX Resources Ltd||0.20||0.13||-35%||$3,250,000||20/2/2023|
|ADC||Acdc Metals Ltd||0.20||0.08||-62%||$3,389,220||17/1/2023|
There were two new ASX listings over the past week:
On September 12, JBY announced itself as a significant new name in lithium, rising strongly on its first day on the ASX and bringing with it one of the largest exploration portfolios in Canada’s prolific James Bay lithium district.
Totalling ~224km2, the company’s Joule, Aero and Aqua properties are located in the ‘La Grande’ sub-province, along trend from the Corvette deposit, where Patriot Battery Metals (ASX:PMT) has an inferred MRE of 109.2Mt @ 1.42% Li2O and 160ppm Ta2O5.
The JBY share price is now double the initial IPO price.
Novo meanwhile ended flat after it jumped as high as 38% on its market debut – shares were listed at 20c and traders got in and got out by the close.
After raising $7.5m to join the ASX, the Canadian gold miner sits atop one of the largest prospective tenures for gold and battery metals in WA’s Pilbara region for 10,500km2 and is concentrating on the development of its Egina JV with its biggest shareholder, De Grey Mining (ASX:DEG).
Back in June, De Grey Mining made a cornerstone investment of $35m to earn up to a 50% interest in Novo’s Becher gold project, 28km away from DEG’s massive Hemi gold deposit which forms part of the 11.7Moz Mallina gold project. In Victoria, Novo also owns the Belltopper project.
All dates are sourced from the ASX website. They could change without notice.
Expected listing: September 21
IPO: $6m at $0.20
FNR is planning to drill down into the Empire Gold Project 34km west of Chillagoe inland from Cairns.
Explored privately by FNR since 2018, the project already has a resource of 820,000t at 0.85g/t for 22,500oz, 16,890oz of those in the indicated category.
It sits within a marathon run of Chillagoe and two mines in Mungana and Red Dome that have produced gold in recent times.
When it closed in 1997, Red Dome had delivered over 700,000oz of gold and 29,000t of copper over a decade at a grade of 2.1g/t.
Expected listing: October 2
IPO: $15.5m at $0.45
This lithium explorer is currently focused on selected projects located in the United States.
Assets include the flagship Black Mountain Project in Nevada, which contains outcropping pegmatites with grades of up to 6.68% Li2O from rock chip samples.
The Resurgent Project, also in Nevada, holds the second largest land position in the McDermitt Caldera, an area that hosts the largest lithium resource in the US at >40Mt of lithium carbonate equivalent (LCE).
Chariot says assay results and initial geological work suggest that these two projects compare favourably with respect to grade and scale with similar early-stage hard rock lithium and claystone lithium projects in the US.