Pop culture figurine maker Funko (FNKO) fell 41% on Thursday to close at $7.07. That gave it the worst first-day return for an IPO in 17 years, since June 2000 financial services IPO eChapman.com (-43%). Funko priced a downsized IPO at $12 per share, below its range of $14-$16, to raise $125 million at a market cap of $586 million. Investors were likely concerned over slowing organic sales growth and contracting margins in a hit-driven industry.
Funko's flop is particularly unusual for an IPO led by Goldman Sachs. Goldman-led deals over the past five years average a stellar first-day pop of 25%. Fewer than one-in-five finish the first day below issue.
Allena Pharmaceuticals (ALNA) also plummeted on Thursday; the kidney disease biotech dropped 29% for the sixth-worst IPO debut in 17 years. October's 19 deals averaged a first-day pop of 26%, but negative after-market returns likely contributed a valuation-sensitive IPO market. High-quality growth IPOs like Altair Engineering (ALTR) and discounted industrial plays like Evoqua Water (AQUA) and Loma Negra (LOMA) were well-received. But IPO investors were not bobbleheads on Thursday, and future IPOs should expect to encounter a discerning crowd.
The analysts at Renaissance Capital are excited to introduce IPO Pro later this month. And check out our newly-released IPO Masterclass: The first video in the series is now available.
