The total exit value of United States’ public listings surpassed$1 trillion after the automotive company Rivian Automotive Inc. (RIVN) went public in November. The figure, while emphasizing the market’s warm reception for recent initial public offerings (IPOs) and other new entrants, also underscores concerns about the disconnect between the valuations and fundamentals of these companies, which lack historical data.
Market bull Jim Paulsen of the investment management firm Leuthold Group has predicted a 10% to 15% market correction due to high valuations and federal policies becoming less accommodating. In addition, smaller companies are bearing the brunt of the recent market swings.
Given this scenario, we think it might be best to avoid the recent IPOs of companies with weak fundamentals, such as DiDi Global Inc. (DIDI), Toast, Inc. (TOST), Full Truck Alliance Co. Ltd. (YMM), and Marqeta, Inc. (MQ). These stocks have plunged more than 40% in price since listing. Furthermore, DIDI plans to withdraw from the New York Stock Exchange due to Chinese regulatory pressure.
DiDi Global Inc. (DIDI)
DIDI is a mobile technology platform that provides ride-hailing, taxi-hailing, hitch chauffeur, and other shared mobility services and enterprise business ride solutions. The company, which is headquartered in Beijing, China, went public in a traditional IPO by listing its American Depositary Shares (ADSs) on the New York Stock Exchange on June 30, 2021.
On July 12, DIDI announced that according to a statement by the Cyberspace Administration of China (CAC), 25 of the company’s operative apps in China would be taken down because they were collecting personal information in direct violation of relevant laws and regulations. The app takedowns are expected to adversely impact the company’s revenue.
In response to the apps takedown, The Schall Law Firm has filed a class-action lawsuit against DIDI for violation of federal securities laws, alleging false and misleading statements to the market. The company is also facing class-action lawsuits from notable law firms Labaton Sucharow LLP, Kahn Swick & Foti, LLC, and Levi & Korsinsky, LLP.
For the three months ended March 31, DIDI’s total costs and expenses increased 105.2% year-over-year to $7.45 billion. Its net cash used in operating activities rose 105.8% from the prior-year quarter to $937 million. And its net cash provided by investing activities came in at a negative $307 million, down 147.6% from the same period last year.
Analysts expect DIDI’s EPS to be negative $0.09 for the current year (fiscal 2021).
The stock has declined 52.8% in price since it went public on June 30 and 13.7% over the last five days to close yesterday’s trading session at $6.67.
This bleak outlook is reflected in DIDI’s POWR Ratings. The stock has a Momentum and Quality grade of D. In the 169-stock Software – Application industry it is ranked #105. The industry is rated F. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Click here to see the additional POWR Ratings for DIDI (Growth, Value, Stability, and Sentiment).
Toast, Inc. (TOST)
TOST in Boston, Mass., is a cloud-based technology platform that operates in the restaurant industry in the United States and Ireland. Its offerings include Toast Point of Sale (POS), Toast Order & Pay, Toast Flex, Toast Go, and Toast Tap. The company went public in an IPO on the New York Stock Exchange on September 22, 2021.
On November 16, TOST unveiled new products aimed at helping restaurants adapt to digital transformations and access sales faster alongside managing takeouts profitably. However, it might take some time before the company realizes its expected gains from this development.
TOST’s net loss and net loss per share attributable to common stockholders increased 303.3% and 238.7%, respectively, year-over-year to $252.50 million and $1.05 in its fiscal third quarter, ended September 30. Its non-GAAP cost of revenue rose 113.7% from the prior-year quarter to $397.86 million.
The Street expects TOST’s EPS to remain negative until next year (fiscal 2022).
TOST’s shares have declined 41.2% in price since it went public on September 22 to close yesterday’s trading session at $36.74. It has declined 37.7% over the past month.
It is no surprise that TOST has an overall D rating, which equates to Sell in our proprietary rating system. The stock has a D grade for Value and Stability. It is ranked #49 out of the 59 stocks in the Software – Business industry. The industry is rated D.
To see the additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for TOST, click here.
Full Truck Alliance Co. Ltd. (YMM)
Based in Guiyang, China, YMM is a digital freight platform operator that connects shippers with truckers to facilitate shipments. Its offerings include freight listing, brokerage services, and online transaction services. The company went public on June 22, 2021.
In September, securities litigation law firm The Gross Law Firm issued a notice regarding a lawsuit against the company on behalf of shareholders. The lawsuit alleged that YMM had made false or misleading statements or failed to disclose facts about its apps imminent cybersecurity review and restrictions by the Chinese government. The company is also facing similar lawsuits from Rosen Law Firm, The Schall Law Firm, and Levi & Korsinsky, LLP.
For its fiscal third quarter, ended September 30, YMM’s total operating expenses increased 33.8% year-over-year to $224.51 million. Its non-GAAP adjusted operating income declined 157.5% from the prior-year quarter to a negative $12.59 million, while non-GAAP adjusted net income came in at a negative $0.74 million, down 103.3% from the same period last year.
A $1.24 billion consensus revenue estimate for the next year (fiscal 2022) indicates a 76.4% year-over-year increase.
The stock has declined 47.9% in price since it went public on June 22 and 12.3% over the past five days to close yesterday’s trading session at $10.94.
YMM has a Value grade of D. It is ranked #103 in the Software – Application industry. Click here to see the additional POWR Ratings for YMM (Growth, Momentum, Stability, Sentiment, and Quality).
Marqeta, Inc. (MQ)
MQ is a cloud-based open application programming interface platform that provides card issuing and transaction processing services. The Oakland, Calif.-based company offers solutions to commerce disruptors, digital banks, tech giants, and big financial institutions. MQ went public on the Nasdaq Global Select Market on June 9, 2021.
On December 7, MQ announced that it is expanding its partnership with a global retail bank, Klarna, in European markets. The partnership is expected to expand MQ’s European business, but the gains from this expansion may be stretched out over an extended period.
MQ’s loss from operations increased 274.9% year-over-year to $45.64 million in its fiscal third quarter, ended September 30. Its net loss rose 271.8% from the prior-year quarter to $45.73 million. And its adjusted EBITDA decreased 820% from the same period last year to negative $4.94 million.
Analysts expect MQ’s EPS to remain negative at least until next year (fiscal 2022).
MQ’s shares have declined 42% in price since the company went public on June 9 to close yesterday’s trading session at $17.70. Over the past month, the stock has declined 35.1%.
MQ’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, which translates to Sell in our POWR Rating system. MQ has an F grade for Growth and Value and a D grade for Stability and Quality. It is ranked #55 in the Software – Business industry.
In addition to the POWR Rating grades we have stated above, one can see MQ ratings for Momentum and Sentiment here.
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DIDI shares were trading at $7.00 per share on Tuesday afternoon, up $0.33 (+4.95%). Year-to-date, DIDI has declined -50.50%, versus a 26.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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|YMM||Get Rating||Get Rating||Get Rating|
|MQ||Get Rating||Get Rating||Get Rating|