Just before SweetgreenHolding its IPO last month research firm New Constructs presented a rather grim price target for the chain of salad restaurants: $0. It was offered at $28.

New Constructs published their announcement a week before. RivianThe estimated value was $13 trillion, far less than the $66.5 billion valuationIt was achieved on IPO Day. The day before GitLabGet on the market in OctoberAccording to the company, it valued code-sharing software developer at $770million, 93% lower than what was sold in shares.

None of these calls came close to reaching the target. Even though almost all the IPOs this year were wiped out by a recent sale-off, bear market territoryNew Constructs bearishness seems extreme.

David TrainerThe 19-year old firm’s founder and CEO, a Wall Street analyst who was also formerly CEO, doesn’t seem to be deterred.

Trainer (49) said that it feels good to put out something mathematically sound. Trainer spoke in an interview via video. “Crazy stuff happens. That shouldn’t be a problem. It is important that I remain true to the things I believe in.”

Trainer is not convinced that IPO valuations will be accurate.

He uses a method he has developed over two decades for evaluating company fundamentals like earnings and cash flow. This model is an antidote for the hype that pushes venture-backed start ups to the public markets with huge promises and no profits.

Year-end IPOs will be a great year for entrepreneurship record levelexceeds the 2020 record for fundraising. On Thursday, infrastructure software vendor HashiCorpas published on the Nasdaq closedIt became the 19th company in tech to be publicly traded this year, with a market value of $15 billion.

This week SamsaraThe 20th place is expected to go to, which connects devices and the internet.

Both businesses are experiencing losses.

Trainer is well aware that his negative views about tech IPOs have put him on a financial island. It is a similar location to his actual life.

Trainer lives in Nashville, Tennessee. He is approximately 900 miles away from Wall Street. Trainer and his wife grew up there and they have three children.

Trainer said that his firm employs about twenty people. “We believe differently than Wall Street.” Because they have been “brainwashed into being Wall Street bankers” and are unable to conduct research as similar to the past, he says he avoids recruiting finance professionals. What we do is contrary to this.”

New Constructs was founded by Trainer in 2002, after having worked as an analyst for six years at Credit Suisse First Boston. Trainer had a direct seat to dot-com boom, bust, and was aware of the troubled role that analysts played in exaggerating companies for banks. Trainer set out to establish a company that focuses exclusively on research and removes any possible conflicts.

Software is used by his company to analyze thousands of pages worth of prospectuses, quarterly reports and annual filings. New Constructs can cover over 10,000 stocks by letting the computers handle all of the quant work.

Trainer stated that the firm serves hundreds of clients in the investment universe. partnerships with TD AmeritradeInteractive Brokers. All customers with brokerage accounts have access to New Constructs reports by both companies.

IPO coverage only a part of the overall mix. Trainer’s team creates lists such as “most desirable stocks” or “most deadly stocks”, and also rates different exchange-traded fund types.

This is also true for public companies. It is a November report, New Constructs said Tesla’s $1.2 trillion valuation implies the company “owns 60%+ of the entire global passenger EV market and becomes more profitable than Apple“(AAPL) By 2030” despite its declining EV market share.

The July issue of the firm saidThat is what for Uber to justify its valuation, the company would have to control 171% of the total addressable market for ridesharing and food delivery in 2030.

Trainer’s IPO Reports include some of the most interesting calls. They have allowed New Constructs to stand out from a sea of coverage on large public companies.

Trainer explained that “we don’t have the same competition in IPO space.” If we react quickly to the S-1, then we could be the first company out with an opinion.

Traditional sell-side companies don’t typically cover IPOs. Investment banks can’t publish material for a period of time after an offering. Companies don’t usually start forecasting earnings until the first reports are made.

Different rules can be applied to New Constructs. To form its position, the firm is not engaged in advisory work. It relies on publicly available information found at roadshows, prospectuses, and other internet material.

Trainer says readers are aware that the firm is only a research agency and there is no ulterior motive.

Trainer stated that the higher your capital-raising requirements, the less bearish people will you see. This refers to the mass media coverage larger companies receive in the first months of going public. You should be paying attention.

Trainer joined the IPO market in 2015 just after the cloud software vendor BoxIt made its New York Stock Exchange debut. The inaugural reportBox had the following title: “This IPO belongs in the tech boom.” It stated that Box would need to grow its revenue 20% annually for the 25-year period and increase its pretax margin by 10% to justify its $22 share price.

Although Box isn’t a great investment in comparison to the wider market, it hasn’t crashed and now trades at around $25.

In the years that followed, New Constructs delved into other IPOs and created a “danger area” warningsVisit our travel website TrivagoEnde 2016 SnapIn the early 2017 highlightingSocial media giant’s “dismal Fundamentals” and “nosebleed Valuation.”

Trivago’s call is smart as stock prices have plummeted from $11 to $2.19. Snap has tripled its value since it was IPO.

With reports reporting on software manufacturers, trainers’ IPO coverage increased in 2018. Dropbox, Domo, Avalara EventbriteNon-tech businesses like BJ’s Wholesale ClubThermos and cooler makers Yeti.

New Constructs really did pay off for 2019 with their keen eye.

The headline in a New Constructs article reads, “WeWork is one of the most absurd IPOs of 2019”. reportFive days later, the privately valued office-sharing firm, which was worth $47 billion in private valuation, closed its doors on August 19, filedThe initial prospectus.

WeWork has taken a copy of an older business model. New Constructs stated that WeWork has copied an old business model, which is office leasing. They also added tech terminology to it and convinced venture capital investors to value the company at 10x or more its closest competitor.”

After placing WeWork in the “danger area”, the company was able to reopen six weeks later pulledHis IPO. Investors protested at the company’s valuation but were turned away by mounting losses, poor corporte governance, and devastating information about founder Adam Neumann.

Trainer stated to CNBC that “That was quite a gamechanger.” Trainer said that the IPO was never actually held and that many people credit us for changing the course.

New Constructs has published an article in a sort of victory lap. follow-up report titled “WeWork’s Failed IPO Is a Win for Main Street.”

WeWork was an exception. Stocks have risen more often after their IPOs, as retail investors revel in their first chance to join the celebration.

New Constructs, for instance, applied their WeWork model in November 2020. DoorDashThe food delivery business that more than tripled its size in the wake of the pandemic.

“This IPO reminds us of WeWork’s attempted IPO, which we called The Most Ridiculous IPO of 2019, because DoorDash’s business is similarly disadvantaged,” New Constructs wrote in a noteHeadlined as “The Most Ridiculous IPO Of 2020.”

DoorDash said it had no future profits and was facing competition from companies offering the same service at no cost. New Constructs believed DoorDash’s $25 billion valuation was insane.

The company nevertheless shot up on its first daytraded to $60 billion. It is currently worth $54 billion.

New Constructs began its IPO coverage this year with a dating site BumbleHow to get it? wasThe most expensive items are “priced to perfection” and this trend continued through November. pessimistic callSweetgreen was the most popular year-end product.

The firm stated that the stock was likely to be worth $0 due to the limited differentiation of the company and intense competition from established restaurants and new entrants, who are quickly replicating Sweetgreen’s concept and menu.

Sweetgreen posted a loss $87 Million in the first three quarters, and New Constructs experienced a “narrow path” to profitability.

Trainer stated that Sweetgreen is an easy job. “It is in the business selling lettuce. It’s very simple and there are many good people to work with.

Trainer even published bearish reviews on the shoemaker AllbirdsThe eyeglasses manufacturer was rated “unattractive”. Warby ParkerInvesting app RobinhoodBlog service Squarespace(“Very unattractive”) with an “out-of-this world” valuation

Constructions of the Future warned againstGitLab is a great choice because it offers a lot of competition, low cash and high risk. MicrosoftAnd he said: avoidRivian isn’t showing it can produce more than one car per year, according to the company.

Although those stocks aren’t going his way yet, Trainer did make an extremely wise call this year. New Constructs reported that Chinese ride-hailing companies were being established in June. DidiWas worth the effort no more than $37 billion. Its NYSE debutMarket cap stood at almost $68 trillion.

After a five month slide, Didi’s value was around $31 billion as of Friday. Didi earlier in the month stated that she was worth $31 billion. delistingThe NYSE will list the company in Hong Kong, despite pressures from China to limit local technology.

New Constructs’ report didn’t mention any delisting issues, but did point out regulatory problems as an overhang. According to reports, the company was already under investigationby the Chinese government in antitrust matters

New Constructs wrote. The Chinese regulators were recently disintegrated and issued record fines against other large Chinese firms.” 

Didi’s Listing Day, June 30th. Trainer told CNBC’sPower Lunch claims that this company is one of many “overpriced IPOs” and wants to make “hay while it shines.”

Trainer admits to looking at the wider tech IPO market and agreeing that the sun shines for a surprising amount of time. He stated that he anticipates some sort of reckoning eventually.

Trainer stated that he will continue to do what is right in the interim.

“Either Trainer stated that we either believe in the things we believe or are just going along for the sake of it.” “We’re not here to do people harm. “We believe that what we are doing is providing society with a service.”

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