What happened
Shares of Savers appreciate village (NYSE:SVV) The stock is down more than 10% this week, according to data from S&P Global Market Intelligence. The recent entrant to the public markets had no major news to report, meaning the company is likely just suffering from the post-IPO malaise. At one point this week, shares of the stock fell more than 15% before recovering on Friday.
So
Savers Value Village is a for-profit thrift store operator in the United States. People give the stores their old and used items, which Value Village then sells to shoppers looking for big discounts. It went public earlier this summer with a market cap of $4 billion.
Today, its market cap has fallen to around $3 billion, with the stock down more than 20% in the past month. But there is no recent news from the company, so why is the stock falling? It’s easy. On average, recent IPOs have underperformed the broader market, with 32% of new shares underperforming the market by more than 10% in the first three months after the IPO.
But why does this happen? There are probably two perpetrators. First, IPOs are generally priced for perfection, which can lead to a lot of underperformance as company and stock prices eventually converge. Second, when a company goes public, there are many shareholders looking to exit their positions. If they do, it could put downward pressure on the stock price for a short time.
What now
Savers Value Village appears to have simply declined due to market dynamics. But the company looks solid. In 2022, it generated over $200 million in operating revenues, which doesn’t look crazy expensive compared to its current $3 billion market cap. If you believe the thrift store industry in the United States has room to grow, Savers Value Village could be a stock to put on your watchlist.
Now may not be the best time to buy the stock since it is still so close to its public debut, but there could be a great buying opportunity in Savers Value Village for patient investors in the coming years.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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