Lyft’s tumble rattles IPO investors
Kaltbaum Capital Management President Gary Kaltbaum and Payne Capital senior wealth manager Courtney Dominguez discuss the new tech IPOs and the state of the stock market.
Pinterest is expected to target its initial price offering (IPO) at $19 per share, just two dollars higher than previously estimated, according to the Wall Street Journal.
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The social media platform is one of two tech unicorns debuting at the New York Stock Exchange Thursday. Video conferencing company Zoom is set to price at $35 per share and is hoping to avoid a similar fate to Lyft.
Kaltbaum Capital Management President Gary Kaltbaum believes that investors should generally be cautious about IPOs and that it is important to look when the stock first opens at whether “they open them too hot or not.”
“They overpriced it, whoever did the deal made a huge mistake and the fact that it is way below even the IPO price is telling,” he said on FOX Business’ “Making Money” Wednesday. “I would just be on the careful side right at this second.”
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Katlbaum believes the problem with IPOs is that many of these companies begin to “lose a lot of money” as shares of the most recent IPO, Lyft, have dropped nearly 25 percent in the three weeks since the company went public.
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While FOX Business’s Charles Payne agrees that Lyft has its issues, he said there are other IPOs that have done extraordinarily well. Jumia, Africa’s largest e-commerce company, opened at $18.95 on an initial listing price of $14.50 last Friday.
Payne said he thinks Zoom is the IPO to buy, while Pinterest is an IPO he would wait on.
“The reason I said I like Zoom more than Lyft is because Zoom has only raised money five times, Lyft has raised money fifteen times and they’ve taken their valuation through the roof.”
Payne Capital Management senior wealth manager Courtney Dominguez agrees, saying she believes that “[Zoom] is actually profitable right now whereas Pinterest isn’t…Just last year, they increased earnings by about 60 percent. Plus, they cut their losses in half.”
Kaltbaum, however, sees the long path of probability for as a red flag.
“The market is a little frothy right here and maybe they need to come in a little bit, maybe they are on the overpriced side…the problem with a lot of these companies is they should have come public two years ago in the midst of their bigger growth spurt.”
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In terms of the Pinterest and Zoom’s IPOs, Kaltbaum said he would rather wait because they are “coming at the wrong time.”
“I think they may be late in the game. A couple of years ago may have been much better,” he said.
