CoreWeave’s Debut Dud Extends IPO Malaise Instead of Ending It

(Bloomberg) — The market for US initial public offerings suffered another body blow this week when one of the most-anticipated deals of the year was a dud — extending a series of deals that have missed the mark of sky-high expectations. And things weren’t any better in its trading debut on Friday.

CoreWeave Inc., the cloud-computing provider that was targeting a $4 billion blockbuster IPO just weeks ago, raised $1.5 billion in a deal that was walked down by 40% from the midpoint of the range its bankers pitched to investors last week. The company ended Friday with a diluted valuation of $23 billion, roughly in line with its last funding round but short by a third of its initial target of more than $35 billion.

That’s not how Wall Street wanted this to go.

The Nvidia Corp.-backed company was among the hottest startups in artificial intelligence and bankers and investors saw it as opening a logjam of would-be IPOs with a bright and shiny debut. The shares, which had been marketed for up to $55 apiece, sold for $40 in the IPO, opened at $39, and closed at $40, leaving the company with a market value of more than $18 billion.

It’s the latest deal to fall flat, and one with some extra bad luck. The company had some of its final investor meetings Wednesday, when the Nasdaq 100 dropped 1.8%. From a market perspective, things got worse as investors steeled themselves for its opening trades, with that key equity benchmark dropping more than 2%.

When the dust settled, the company narrowly avoided becoming No. 5 out of the year’s 10 largest US IPOs to leave investors in the red. The only other $1 billion-plus US listings this year, Venture Global Inc. and SailPoint Inc., are down 60% and 15% from their IPO prices, respectively. Overall, the 76 companies that have gone public this year in the US are down 4.1% on a weighted average basis, according to data compiled by Bloomberg.

The combination of headaches has cast a shadow over bankers’ plans to take a list of long-awaited companies public.

“It goes back to it being a fragile IPO market,” said West Riggs, head of equity capital markets at Truist Securities Inc. “If deals are working, valuations can get more aggressive, but if they aren’t working it becomes more of a buyers market. It’s just where we are.”

With investors bracing for the impact of President Donald Trump’s planned April 2 announcement on reciprocal tariffs — dubbed by him as “Liberation Day in America” — the choppy performance and second guessing is expected to linger. That’s led to questions around which companies will be willing to take the IPO plunge.

Since March 14, Klarna Group Plc, StubHub Holdings Inc., EToro Group Ltd. and Ategrity Specialty Insurance Co. have made their listing plans public despite the market’s pullback and the threat of a trade war. Which companies go will depend heavily on their willingness to meet would-be buyers on their terms relative to publicly traded peers.

“With all of these, the issue is valuation,” said Jay Ritter, professor of finance at the University of Florida. “The fact that the Nasdaq has sold off in the last two months has impacted all deals and, if things continue to get worse, IPO activity may remain muted.”

That gets back to the debate surrounding how poorly the CoreWeave IPO priced relative to expectations and whether the issues are company specific or emblematic of broader market angst. The company opted to press ahead with IPO plans despite the looming Trump announcement and the drubbing technology stocks have taken.

Moreover, investors have been trimming their big bets on AI companies. Alibaba Group Holding Ltd. Chairman Joe Tsai, among others, has warned of a potential bubble forming in data center construction, arguing that the pace of that build-out may outstrip initial demand for AI services. TD Cowen analysts rattled investors on Wednesday with a note saying Microsoft Corp. has abandoned data center projects.

Nvidia anchored the share sale with an order of about $250 million — roughly 17% of the deal — a person with knowledge of the matter told Bloomberg, asking not to be identified because the information was private. Representatives for Nvidia declined to comment.

Half of the shares sold in the IPO went to the three largest investors in the deal, other people familiar with the matter said. The top 15 investors in the IPO took 90% of the shares, the people said, asking not to be identified because the information isn’t public.

Without the support of Nvidia, the IPO “wouldn’t have closed,” Chief Executive Officer Michael Intrator told Bloomberg News in an interview. “If 27 others didn’t show up, it wouldn’t have closed,” he said, speaking after the IPO was priced at a volatile time for markets.

For the companies that are working toward a public debut, the focus on valuation and strong fundamentals is paramount if they want to debut with would-be buyers on edge.

“IPO investors are still taking a cautious approach, remaining laser-focused on any uncertainties about the growth prospects of company conducing its IPO,” said White & Case Partner Joel Rubinstein. 

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