What's Next For 2019's IPO Class?

The IPOs of 2019 like Uber (UBER - Free Report) , Lyft (LYFT - Free Report) , and Levi Strauss (LEVI - Free Report) may not be out of the woods yet. The unicorn craze has crashed hard after many of this year’s market debuts have struggled to make any gains thus far. Highly anticipated IPOs like ridesharing companies Lyft and Uber are down 51.9% and 30.4%, respectively.

Furthermore, IPO filing mishaps like WeWork, which unraveled before their public offering, have made investors wary about the so called “unicorns” of 2019. As these struggling stocks continue through the end of their first calendar year, they inch closer to the end of lock-up periods as well, which could send stock prices downwards.

More Turbulent Times Ahead?

Lock-up periods are expiring for this year’s IPO class, which analysts say could introduce a new layer of pressure for young companies. Founders, employees, and some early private investors who bought in before a company goes public are usually restricted from selling for between 90 and 180 days. Uber, Pinterest (PINS - Free Report), and others are approaching that expiration date between mid-October and the end of the year.

The Bear Traps Report says roughly $31 billion worth of public company shares are unlocking from now until the end of this year. A sell off frenzy would be detrimental to the already struggling young companies and could also discourage other private companies from going public. If the early investors decide to sell simultaneously around the end of the lock-up period, then they would flood the market with shares, which would in turn weigh on stock prices.

DataTrek’s Nick Colas commented, “Venture capitalists are going to sell into lock ups because they have a huge investment in the assets and because their cost basis is so low — they still have a big gain even if the IPO hasn’t performed.” Essentially, venture capitalists just want to get their money back and move on to the next thing.

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