London Daily

Focus on the big picture.
Thursday, Sep 10, 2026

Fund managers waiting out high-profile unicorn IPOs after string of flops

Fund managers waiting out high-profile unicorn IPOs after string of flops

A deep disconnect between private market valuations of companies and the prices their shares fetch on the open market is pushing more mutual fund managers to the sidelines during high profile IPOs, anticipating the newly listed stocks will inevitably fall.

The war over what a company is worth comes as a generation of Silicon Valley darlings exit the insulated world of venture capital, where investors are more focused on a company’s growth and potential, and enter the public markets, where fund managers and analysts put a premium on meeting each quarter’s revenue and profit expectations.

Uber Technologies Inc (UBER.N), for instance, is down about 30% from its May initial public offering price, leaving it with a market cap about $23.1 billion less than its last private market funding round. Peloton Interactive (PTON.O) , meanwhile, is down 22% from its IPO in late September, chopping more than $1 billion off of its market cap.

As a result, fund managers from firms including Osterweis Capital Management, Firsthand Funds and Federated Investors say that they are becoming more cautious about buying companies that have come to market with multi-billion dollar IPOs, so-called unicorns.

“You’re seeing a lot of companies come out with valuations at $8 billion when they really should be $4 billion companies, and the public market is where a lot of the rationality around valuations happens, and it takes the air out of these really well-known unicorns,” said Jim Callinan, portfolio manager of the Osterweis Emerging Opportunities fund.

Callinan is now shifting his strategy to wait until at least after the 180-day lock-up period, following which company insiders are allowed to start selling their shares, before making any positions in a newly public company.

The most attractive price for newly public companies will most likely be at least a year after they go public because large venture capital funds, like Japan’s SoftBank Group Corp’s $100 billion Vision Fund, have distorted private market valuations and let companies focus on building market share rather than outlining a path to profits, he said.

SoftBank was a major investor in WeWork owner The We Company, which pulled its IPO after it failed to get any investor traction at a valuation between $10 billion and $12 billion, a steep drop from the $47 billion valuation it reached in the private market in January.

“You have really big money that’s inflationary, so it’s not until a company has been public for a few quarters that the real valuation can be found,” he said.


IPO SLOWDOWN

Disappointing performances of well-hyped IPOs like SmileDirectClub Inc (SDC.O), which is now down nearly 60% from its initial pricing of $23 in early September, are contributing to a slump in the IPO market overall, said Kathleen Smith, principal at Renaissance Capital, a provider of institutional research and IPO ETFs.

SmileDirect stock continued to tumble despite thumbs up from the banks that led its IPO, with most Wall Street analysts assigning price targets below the IPO price.

The Renaissance IPO ETF (IPO.P), which tracks the performances of newly public companies, is down 12 percentage points over the last 3 months, while the broad S&P 500 index is up nearly 3% over the same time. The ETF fell alnother 1.3% Wednesday.

“Public market investors are boycotting the IPO market because pure and simple they’re not getting the returns they want,” she said. “You’re now getting these very large private companies that had valuations pushed up to ridiculous levels and public investors are pushing back.”

The reticence on the part of public investors to buy into highly valued IPOs will likely start to eat into how private market investors gauge companies, she said. Overall, there were a record 180 private U.S. companies valued at more than $1 billion as of Sept 1, according to PricewaterhouseCoopers.

Private companies have raised approximately $83 billion in venture funding this year, which is on pace to fall below the $117 billion in funding raised last year, according to PricewaterhouseCoopers. Companies going public have raised approximately $41 billion from public market investors this year, according to data from Renaissance Capital.

“Capital gets sloppy when it’s prolific and a lot of bad ideas get funded,” Smith said, noting that the largest discrepancies in valuations have occurred among well known technology companies while less hyped companies like Beyond Meat Inc (BYND.O) have doubled from their IPO price. “WeWork is so obvious that it was a bad idea, but it could end up that Lyft is a bad idea and SmileDirect is a bad idea.”

Kevin Landis, a portfolio manager at Firsthand Funds who invests in both private and public companies, said that the string of disappointing IPOs will likely continue as private market investors focus more on the search for the next big company than its eventual share price performance.

“It’s a great thought exercise to look at a successful private company and ask if it were public how it would trade. A lot of private investors aren’t thinking that way because they’re trying to expand and not thinking about what this would be if it were a stock,” he said. “They want to find that one great idea where they can declare themselves geniuses for finding it so early.”

Newsletter

Related Articles

0:00
0:00
Close
Buckingham Palace Says Prince Harry and Meghan Will Not Resume Official Royal Duties
UK Treasury Faces Calls to Scrap £100,000 Childcare Support Threshold
Trades Union Congress Urges Labour Government to Rewrite Migration Policy
Riot Police Deployed After Anti-Migrant Protests Turn Violent in Portsmouth
UK Considers Replacing Some Disability Cash Payments With Direct Services
JPMorgan’s Jamie Dimon Warns UK Chancellor Against Higher Banking Taxes
UK Announces New Sanctions Targeting Israeli Settlements in West Bank
Metropolitan Police Investigate Alleged Illegal Donations to Reform UK
UK Charges Wiltshire Man With Assisting Russian Intelligence
UK Orders Urgent Review After Air Traffic Failure Cancels More Than 2,000 Flights
Merz Rebukes AfD Expansion in Saxony-Anhalt
King Charles Confirms Prince Harry and Meghan Will Remain Private Citizens
Labour Selects Former Child Refugee for By-Election in Keir Starmer’s Former Seat
Foreign Private Equity Accelerates Takeovers of London-Listed Industrial Companies
NHS Maternity Care Faces Scrutiny Over Support for Mothers After Caesarean Births
BBC Warns Staff Strikes Are Likely Amid Job Cuts and Programme Cancellations
English Housing Affordability Improves to Best Level in More Than a Decade
UK Health Commission Proposes Framework for Wider AI Adoption Across NHS
Labour Faces Pressure for Wealth Tax Ahead of Autumn Budget
Metropolitan Police Open Criminal Investigation Into Alleged Foreign Donations to Reform UK
UK Police Deploy Riot Officers After Anti-Immigration Unrest in Portsmouth and Dover
UK Defends Sanctions on Israeli Settlements Despite Diplomatic Retaliation
UK Air Traffic Control Failure Cancels More Than 1,000 Flights and Disrupts 65,000 Passengers
Compass Urges £10 Million Wealth Tax and Public Ownership Ahead of UK Autumn Budget
UK Government’s Devolution Plans Face House of Lords Scrutiny
Maldives Seeks New Chagos Sovereignty Talks With UK Prime Minister Andy Burnham
UK Airports Face Continuing Disruption After National Air Traffic Control Failure
UK Bans Imports From Israeli Settlements and Expands Sanctions on Iran
British Chambers of Commerce Forecasts UK Growth of 1% as Investment Remains Weak
UK Suspends Local Government Reorganisation Decisions and Cancels Planned Shadow Authority Polls
UK Parliament Opens Inquiry Into Gaps in Climate Change Preparedness
Andy Burnham and Xi Jinping Hold Talks on Trade, Security and British Consular Cases
UK Joins France, Canada and Other Nations in Measures Against Israeli West Bank Settlements
UK Announces New Sanctions Targeting Iranian Nuclear and Military Networks
British Chambers of Commerce Calls for Business Rate Reform and Productivity Support
UK Farmers Warn Dry Summer Could Reduce Crop Yields and Push Up Food Prices
UK Rail Networks Hit by Widespread Delays After Major Signalling Failures
Matt Clifford Resigns as ARIA Chair After Conflict-of-Interest Scrutiny
UK and France Say Joint Border Operations Have Prevented More Than 48,000 Irregular Channel Crossings
UK Core Inflation Remains Above Expectations as Utility and Commodity Costs Stay Elevated
Jaguar Land Rover Considers Up to 4,000 UK Job Cuts Amid Automotive Industry Pressure
UK Government Pauses Local Authority Reorganisation for Legal Review
UK Public Borrowing Reaches £1.8 Billion in July, Adding Pressure Before Autumn Budget
Chancellor John Healey Puts Regional Devolution and Fiscal Discipline at Heart of UK Growth Plan
Counter-Terrorism Police Lead Salford Investigation After Two Teenagers Charged
UK Rejects Financial Reparations for Transatlantic Slavery
UK and Egypt Step Up Diplomacy Over Escalating West Bank Tensions
UK Pauses Council Reorganisation Across Four English Counties
Jaguar Land Rover Plans 4,000 Job Cuts in Major UK Restructuring
UK Unveils Planning and Regulatory Overhaul to Speed Infrastructure and Economic Growth
×