“I’m going to suggest that any evaluation of an IPO should look more like a scorecard, where you evaluate the company based on the goals of an offering, weighted by their relative importance.”
Earlier this summer as the class of 2020 IPOs took off in a frenzy, Marker made the case for why the Day One IPO pop is highly overrated. Whereas a large day one pop fuels excitement and buzz, a lackluster spike or dip in the stock price is interpreted as anticlimactic and may harm a company’s external reputation. Venture capitalist Hunter Walk summarizes the dilemma aptly with companies facing a “damned if you do, damned if you don’t outcome of headlines” and offers a more nuanced approach to assessing companies as they go public, ahead of Airbnb and DoorDash’s long-awaited IPOs this week. Specifically, he argues that these four questions should be considered based on the goals of an offering, weighted by their importance:
- 65% — Did the Company Raise Enough Money?
- 25% — Did the Company Set Itself Up Well for Year One Performance?
- 5% — Did the Company Take Advantage of the IPO as a Marketing Event?
- 5% — Did the Company Prepare Employees Sufficiently for Post-IPO Life?
