Passing on Airbnb and DoorDash (for now)

Investor Update4 months ago
Despite IPO markets being on fire, we have passed on Airbnb and DoorDash (for now).
Why? Because these IPOs have had unique trading dynamics that we believe do not warrant your capital being invested (yet). Below are our top takeaways.
If you enjoyed this piece, feel free to share with friends and family.
1. Day one "pops" rarely mean anything for the typical investor.
The financial media often wrongly makes high-profile IPOs seem like an easy way to make a quick buck. For example, DoorDash and Airbnb are both widely quoted to have risen +86% and +113% respectively on their first day of trading.
But these day-one returns are for the offering price and only apply to people who had exclusive access to pre-IPO shares (e.g., insiders, hedge funds).
Because the first public trades of IPOs are often meaningfully above these offering prices, true day-one returns for everyone else are often much more muted than what headlines suggest.
On this metric, DoorDash and Airbnb actually returned a typical +4% and -1% on their first trading day - not a terrible outcome, but far from a free lunch.
2. Unique supply/demand imbalances around IPOs often drive share prices to deviate materially from fundamentals.
Part of what causes the first trades of an IPO to get booked materially above the official offering price is: supply of shares < investors' demand for them.
As investment banks drum up excitement around their IPO clients like Airbnb, they also carefully price shares to build in a little undersupply that should boost the stock prices during the first day of trading.
For those who get exclusive access, this often results in a quick one-day win, as prices promptly surge at the onset of trading.
But as the first trading day's hype fades, prices tend to drift back towards more normalized levels. For example, DoorDash and Airbnb are both now down -16% and -14% respectively since their fiery debuts last week.
3. Lockup periods prop up share prices temporarily, but result in downward price pressure in the future.
Most IPOs tend to come with lock-up provisions. These clauses prohibit insiders like employees and private investors from selling shares for 3-6 months following the IPO.
This is intended to prevent a flood of people trying to sell from negatively impacting the initial trading dynamics of the company - but ultimately, that piper needs to be paid.
Inevitably, new public stocks begin facing downward price pressure as the lockup period expires and employees start to sell stock.
This dynamic is one that actually may benefit main street investors, as the technical impact of a wave of new share supply can cause stocks to trade below where their fundamentals dictate. That means a buying opportunity.
TLDR: We're staying patient and picky with Airbnb and DoorDash vs. getting caught up in the IPO hype. 
We continue to monitor the IPO and post-IPO market on your behalf, and will follow up should any attractive new opportunities come across our radar.
As always, if you have any questions, don't hesitate to reach out.
Best, Titan Investment Team

Become a Titan investor today.

Titan Invest is an SEC registered investment adviser. By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Refer to Titan Invest’s Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Contact: 110 Greene Street, Suite 910, New York, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
© Copyright 2020 Whisker Technologies, Inc. All rights reserved.