Challenging IPO market causes October deals to price down

Disappointing returns have made investors especially sensitive to the valuations of new IPOs. Along with a broad contraction in high-flying growth stocks (e.g. ZM, PD), many of the year's most high-profile, highly-valued growth IPOs have lost 20% or more since listing (UBER, LYFT, WORK, SDC, PTON).

In October, 6 out of the 17 IPOs have priced below the range, or 35% of the month's total, the year's highest level (excluding January's single IPO). All but one of October's deals priced at or below the midpoint of the range, on average coming at a 9% discount, also the highest level of pricing pushback of the year. It appears to be having an effect: companies that have gone public since September have an average return from IPO of 8%, compared to 2019's YTD average of 2%.

Another result of investors souring on the "growth at all costs" mantra is that interest is shifting from high-growth tech to more "recession-proof" companies, with large defensive names like Post's BellRing Brands (BRBR; +17% from IPO), waste management firm GFL Environmental (GFL; expected in November), and kitchen products maker Reynolds Consumer (possible 4Q IPO) all stepping forward.

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