Avantor's US$2.9b IPO flop invokes Uber nightmares

Avantor's US$2.9b IPO flop invokes Uber nightmares

2 -min read
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2 -min read
Listen to this article

[NEW YORK] Another week, another massive initial public offering (IPO) stumbling in its debut.

Last week it was Uber Technologies showing weakness out of the gate.

Now Avantor isn't faring much better.

The pricing pushback in 2019's two biggest IPOs represents a break from recent large listings, and a threat to upcoming debuts like WeWork and Airbnb.

Avantor, a chemicals maker for the life-sciences industry, saw its IPO priced at the bottom of a reduced range on Thursday, 30 per cent below the original terms set on May 3. It raised US$2.9 billion in the second-biggest IPO of the year.

Despite the reduced valuation, Avantor shares fell as low as the US$14 offering price during Friday's initial trading.

Uber's shares fell 7.6 per cent from a lower-than-expected IPO price in their May 10 debut, the weakest start since the 2008 financial crisis among US companies that had just raised billions of dollars.

Other recent IPOs traded much better at first.

Among the last 15 US companies whose IPOs raised at least US$1 billion, 13 rose from their IPO price in their first session. That includes household names like Lyft and TradeWeb Markets, plus some less familiar stocks such as AXA Equitable Holdings and VICI Properties.

This is all by design. IPOs are typically priced at a 10 per cent to 15 per cent discount to the company's supposed valuation to pay investors for taking on the extra risk. Without the expectation of a so-called pop, investors could skip the IPO and buy shares on the open market.

Avantor shares are currently trading about 1 per cent above their IPO price.

BLOOMBERG