Surf Air Mobility (NYSE:SRFM), which is trying to build and fly electric commuter planes, fell hard on its debut. After the direct listing was given a reference price of $20, shares of SRFM stock wound up being offered at $5.
A single day of trading saw prices on those shares fall to $3.15, a loss of 37%. There was some recovery overnight, but SRFM was still due to open this morning at $3.34.
It was not an auspicious debut.
Hopes Dashed
Hopes were high for Surf Air before the listing. Public funding has been scarce for speculative venture-backed companies. The idea of an electric plane counts as speculative. The SRFM listing thus counted as a “thaw” to venture companies.
As I wrote before the shares started trading, Surf Air also sports several partners with the expertise to build electric planes, fly them, and finance them. The offering aimed to raise $200 million and deliver a market capitalization of $1.2 billion. This was the estimate from GEM Asset Management, a Luxembourg alternative investment manager that backed the offering.
As things developed, the market cap was just $582.5 million at the close of trading.
Surf Air was careful not to call the $20/share reference price an “offering price,” as with an Initial Public Offering (IPO). The launch was a direct listing, not sponsored by brokers. Had 49.8 million shares been sold at the reference price, however, those shares alone would have been worth nearly $1 billion.
The S-1 issued with the offering was clear. The company is years from being profitable, and its cash burn meant there is doubt about its ability to continue.
Surf Air was just the largest of several IPOs and direct listings that are trying to come to the public market.
SRFM Stock: What Happens Next?
The market of 2023 is not the market of 2021. Investors are more discerning and want to see profits before they buy stock. As the man said: “Fool me once, shame on me. Fool me twice, won’t get fooled again.”
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
