Instacart and Arm's Stock Decline Sparks Concerns Over Tech Sector IPOs

Investors in recently listed tech companies Arm Holdings Plc ARM and Instacart CART are expressing concerns as both stocks have seen significant declines from their initial highs. 

This development raises questions about the environment for new IPOs in the tech sector, the Financial Times reports.

Shares of Instacart, which initially surged up to 40%, have now retreated to their IPO offer price. The stock experienced a low of $29.96 and closed down 11% at $30.10, a mere 10 cents above its IPO price.

On the other hand, chip designer Arm saw an initial jump of 25% on the day of its public debut, but it has since fallen by over 4% for four consecutive days. 

The stock closed at $52.91 per share, 4% above its offer price. U.S.'s geopolitical tensions with China are at play, with Arm deriving 25% of its revenue from China. 

Arm CEO Rene Haas also acknowledged that Arm's growth in China primarily revolves around data centers and the automotive sector.

One IPO lawyer remains optimistic about upcoming listings but acknowledges that poor share price performance among recently listed companies could hinder the IPO market's revival. 

Investors may question the need to buy IPO shares if they anticipate a 20% discount in just a few months.

Additionally, marketing software company Klaviyo, Inc KVYO recently went public. While it initially rose by 32%, it lost momentum in late trading but closed the day with a 9% increase.

Despite being less well-known than Instacart, Klaviyo garnered attention in the tech industry due to its software-as-a-service business model, making it a relevant comparison for potential IPO candidates.

The IPO market has recently emphasized profitability among candidates, which has worked in Klaviyo's favor. The company focuses on strong unit economics, which aligns with current investor preferences.

While Instacart now trades at about a quarter of its peak private valuation of $39 billion, achieved during the 2021 pandemic, Klaviyo debuted near its peak valuation of $9.5 billion in the same year.

Price Actions: ARM shares traded lower by 3.04% at $51.30 premarket on the last check Thursday. CART shares traded lower by 0.33% at $30.00. KVYO shares traded lower by 0.82% at $32.49.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.