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Unicorns Can Become Phoenixes

By Charles Payne, CEO & Principal Analyst

Extending the string of disappointments for 2019 in initial public offerings (IPOs) are Uber (UBER) and Peloton (PTON). Both companies showed promise (Peloton shares were indicating up much higher early in pre-opening action) with their results. However, it was not enough to erase doubts that have haunted them since their debuts. Nonetheless, a glimmer of hope came via a major IPO loser from six years ago. 

Chegg (CHGG) was in business eight years when it went public with hopes of transitioning from textbook rentals into a type of operating system for colleges and an academic hub. The company raised $187.5 million, achieving a valuation of $1.1 billion.

The Chegg IPO was priced in a range of $9.50 to $11.50 on November 12, 2013, but opened at $12.50, perhaps riding the waves of the hot debut of Twitter (TWTR) a week earlier. Wall Street wasn’t buying the story and began selling immediately.

The stock closed at $10.56 and slumped over the years before hitting rock bottom $4.12 in March 2016.  By then, I stopped following the stock, and it only came back into my orbit last year. Interestingly, the stock’s rebound was as dramatic as its freefall.

The shares got back to $11.50 in May 2017 and took off like a rocket.  On July 30, 2017, the shares closed at $45.77, up 1000% from its all-time low. More recently, the stock was hammered again (see chart). Yesterday, it was a big winner and a reminder that even the most devastating IPOs can and often rebound, but it doesn’t happen overnight.



Charles Payne
Wall Street Strategies


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