Uber and 10 Other ‘Busted IPOs’ That Could Still Have Value

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Investors often clamor for access to big initial public offerings, but it is usually best to stay away or sell quickly after any pop in the stock because the record after several years tends to be poor.

Just look at

Snap

(ticker: SNAP), which was one of the largest and most popular IPOs of 2017. Its shares, now around $10, are below the social media company’s IPO price of $17 and down over 85% from its peak of $83 last September.

Still, careful investors could do well searching for value among busted IPOs—those trading well below their original offering price.

For this stock screen, Renaissance Capital, which runs the Renaissance Capital IPO ETF (IPO), looked at the five largest IPOs in each of the past five years and found that 17 of the 25 stocks are trading below their original offering prices. Many of them are down 50% or more.

To further narrow the list—which excludes direct listings—we looked at 11 losing IPOs from the past three years.

The IPO crop from last year, dominated by growth companies, hasn’t fared well due to rich initial valuations and the selloff in highflying stocks this year.

Of the top five 2021 IPOs ranked by size, all are in the red versus original offering prices:

Coupang

(CPNG),

DiDi Global

(DIDIY), Global Foundries (GFS),

Nu Holdings

(NU), and

Rivian Automotive

(RIVN).

Beyond last year,

Lufax Holding

(LU), a Chinese lender to small businesses and salaried workers, has seen its shares drop over 50% since its 2020 IPO. XP (XP), a Brazilian financial-services company, is off about 30% since it went public in 2019.

When looking at busted IPOs, investors may want to focus on valuation and consider companies with relatively low price/sales ratios and those that are in the black—or within sight of profitability.

Company / Ticker	Recent Price	IPO Price	Year of IPO	Price / Sales Ratio*
Coupang / CPNG	$17.64	$35	2021	1.3
DiDi Global / DIDIY	3.56	14	2021	0.9
DoorDash / DASH	53.45	102	2020	4.6
GlobalFoundries / GFS	46.00	47	2021	3.3
Lufax Holding / LU	4.74	13.5	2020	0.7
Lyft / LYFT	13.54	72	2019	1.2
Nu Holdings / NU	4.22	9	2021	3.0
Pinterest / PINS	18.11	19	2019	3.4
Rivian Automotive / RIVN	32.48	78	2021	9.4
Uber Technologies / UBER	23.30	45	2019	1.8
XP / XP	18.68	27	2019	6.5

*2022 estimate using enterprise value / sales

Source: FactSet

Uber

Technologies (UBER), whose shares at around $23 are down nearly 50% from a 2019 IPO price of $45, is a favorite of

J.P. Morgan

analyst Doug Anmuth, who has an Overweight rating and $48 price target.

“Uber is the global leader in two secular growth industries, ride-sharing and food delivery, and is leveraging its massive scale and technological expertise to rapidly launch and scale new products,” he wrote in late June.

Uber now trades for under two times projected 2022 sales.

While

Lyft

(LYFT) trails rival Uber in ride-sharing and lacks Uber’s more diversified business model, its shares are cheaper. At around $13, the stock is down 80% from its 2019 IPO price of $72, one of the worst showings among big IPOs in recent years.

Lyft has a strong balance sheet with about $1.4 billion, or $4 a share, in net cash, giving it staying power. The company is expected to operate in the black this year and trades for just 15 times projected 2023 earnings.

Anmuth has an Overweight rating and $37 price target, citing “a very significant market opportunity” and a “stable duopoly” in ride sharing with Uber.

Pinterest

(PINS) stock is down about 50% this year to around $18, just below its 2019 IPO price of $19. The shares have been hit amid concerns about weakness in online advertising and Pinterest’s vulnerability given its small size relative to

Meta Platforms

(META) and

Alphabet

(GOOG).  

The stock, however, has gotten more reasonable, trading for under 20 times projected 2022 earnings and three times 2022 sales with about $4 a share in net cash. And with a digestible market value of $12 billion, Pinterest could be an acquisition target.

 Investors looking to play busted IPOs—as well as IPO winners such as

Airbnb

(ABNB) —can also buy the Renaissance Capital IPO ETF, whose shares, at around $31.60, are off nearly 50% this year.  

The ETF’s largest five largest holdings are Airbnb,

Snowflake

(SNOW),

Datadog

(DDOG),

DoorDash

(DASH) and

Palantir Technologies

(PLTR). These five stocks account for about 30% of the $190 million ETF, which drops companies three years after their IPOs.  

Write to Andrew Bary at [email protected]