2021 technology IPOs registered a bad day for Monday
While the reason behind such a decline hasn’t been clarified, the stocks that had witnessed some of the biggest rallies in 2021 are also feeling the pinch
Some of the most anticipated tech IPOs for 2021 comprising Rivian, Roblox and Affirm plummeted across the market on Monday, which was followed by a decline of about 1% in the tech-heavy Nasdaq. In contrast to this, the S&P 500 registered a slight decline sliding into the negative zone. The Dow Jones Industrial Average portrayed stronger trades and registered a positive sign, an indication that investors have started to rotate out of the technology industry. While the reason behind such a decline hasn’t been clarified, the stocks that had witnessed some of the biggest rallies in 2021 are also feeling the pinch. Affirm, which witnessed a rapid growth owing to the new partnership with that of Amazon Inc. also dropped of more than 9%. Roblox, benefitted from the growing interest in the Metaverse closing below its mark for the day by 11%.
The sell-off recorded for the electric vehicle-maker Rivian, valued ahead of General Motors and Ford upon its market debut and has been found to be a growing rival to Tesla. Its stock registered a drop of about 8% as the investors have been making profits. The apprehension toward higher interest rates, which is generally translated as a reduction in expected earnings growth for the investors, could have started to become one of the biggest contributor to the sell-off. In addition to this, the Biden administration have nominated the U.S. Federal Reserve Chairman Jerome Powell for its second term on Monday. Along with this, the first Fed rate increase is not anticipated till summer 2022.
Amid potential hikes in the interest rate, Goldman Sachs analysts have been urging the portfolio managers to start focusing upon the growth stocks showcasing elevated current profitability and remain clear of the fast-growing firms, which have been valued entirely on long-term growth prospects. They stated that the recommendation is instated for avoiding fast-growing firms, that have been registering a higher long-term valuation growth expectation, that happen to be more vulnerable to the growing risk of interest rates.