Updated Dec 14, 2020 - Economy

No one has cracked the bull market IPO code

a coin. Illustration: Eniola Odetunde/Axios

Illustration: Eniola Odetunde/Axios

The 2020 unicorn IPO stampede has hit a speedbump, with gaming platform Roblox postponing its IPO until early 2021, and fintech Affirm likely to do the same.

What to know: Neither delay reflects soft investor interest or other concerns about the underlying businesses. Instead, they're about broader IPO market issues.

Inside Roblox: The company had planned to include a large secondary slug for employees, per sources familiar with the process.

  • Then Roblox saw the massive first-day pops for Airbnb and DoorDash — despite both companies using share price matching systems from Morgan Stanley and Goldman Sachs, respectively — and got worried that its own people would feel shortchanged.
  • The board voted Friday to delay and the company is now working to redesign the offering, possibly by cutting down the secondary size and unlocking a percentage of vested employee shares.
  • Roblox CEO Dave Baszucki shared the news with employees via email, writing in part: "We've seen companies take innovative approaches to creating a more market-based relationship between investors and companies. Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small."
  • To be sure, the move is unlikely to thrill all "Robloxians," particularly any of those banking on pre-holiday liquidity.

Inside Affirm: As of yesterday the company was still hoping to IPO in 2020, by launching the roadshow today, getting the book covered by a few deep pockets and pricing next Monday night. But that hasn't happened as of this writing, and it's a tight timing needle to thread.

  • Affirm is also frustrated by the "pop" issue, but sources place most of the delay blame on the SEC — claiming it's been difficult to get prompt responses.
  • This is an issue that bankers have grumbled about for weeks, seemingly driven by the flood of registration documents, but it didn't seem to cause timing problems for anyone else (including Wish, which filed for its IPO two days after Affirm, but still plans to price this week.
  • One variable might have been Affirm's recent move to buy PayBright for C$340 million. The deal was announced via press release on Dec. 3, but not referenced in a publicly-available SEC filing until earlier this morning.

Between the lines: Both Roblox and Affirm still plan to go public soon, although it's not yet clear how the first-day pop issue will be resolved.

  • Those new "hybrid" systems, first used for the Unity Software IPO, have failed to stem pricing volatility, which was their primary purpose.
  • There's just a massive delta right now between what large institutional investors and retail investors will pay for growth, and new issues do need some sort of active float (whether that be to private banking clients, Robinhood, or someone else).
  • No company wants to miss out on the entire pop, but the bigger fear is trading down below the IPO price when lockups expire.

The bottom line: No one has cracked the bull market IPO code.

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