Last week, startup company Peloton fell as much as 15% from its initial public offering (IPO) price of $29. The exercise equipment company may be the latest in a string of IPO’s that have stumbled coming out of the gates, but it highlights the need for investors to get more broad exposure to IPOs via the Renaissance IPO ETF (NYSEArca: IPO).
Various analysts are already using Peloton as a case-in-point scenario that would detract investors from IPOs.
“The difference between Peloton and Endeavor is Peloton got done at the high end of the range, raised $1.2 billion and is worth $11 billion,” said Rett Wallace of Triton Research. “WeWork and Endeavor said we’ll do this later, you know, or not at all. The window, I think, is going to be more influenced by the inventory. Since Lyft, what we’ve seen is like nine really traditional software companies go public — Data Dog, Ping Identity, just the most recent ones — doing great, but the misfit toys, you know, the Ubers, Lyfts, Fiverrs having more trouble. … It seems like the market sort of confined Peloton to the misfit toys a little bit yesterday.”
“I really thought Peloton was going to do great. I don’t have a Peloton,” said Robert Herjavec of Herjavec Group. “I’m a huge Soul Cycle addict. So I have to say that, but they have a great recurring revenue model. I think the recurring revenue is around $200 [million]to $220 million a year. That’s a great business. What it tells me is, if you’re losing money, it’s probably not a great time to do an IPO. As great a company as Peloton is, they’re still going to lose … Lyft is losing money, Uber is losing money. The IPO market is really not very kind to companies that aren’t making money.”
However, investors can still get in on the IPO action by focusing on more broad exposure via exchange-traded funds rather than allocating capital to a single IPO. IPO seeks to replicate the price and yield performance of the Renaissance IPO Index, which is a portfolio of companies that have recently completed an initial public offering (“IPO”) and are listed on a U.S. exchange.
For investors seeking IPO opportunities around the globe, the Renaissance International IPO ETF (NYSEArca: IPOS) adds an international spin to the IPO market. IPOS tracks the rules-based Renaissance International IPO Index, which adds sizeable new companies on a fast-entry basis with the rest upon scheduled quarterly reviews. Current IPOS holdings include SoftBank Corp, Xiaomi and China Tower Corp.
For more market trends, visit ETF Trends.