The 2021 financial year saw an unusually high number of new non-mining ASX listings.
The enthusiasm no doubt came on the back of a market soaring out of the COVID-19 trough in autumn 2020.
But as sentiment turned away from growth into value shares late last year, some initial public offer (IPO) stocks started to turn sour.
"IPOs can give you wonderful returns if you get them right but burn your money if you don't," Montgomery Small Companies Fund manager Gary Rollo said.
"Because while there were some big winners – like Cettire Ltd (ASX: CTT), Aussie Broadband Ltd (ASX: ABB) and Universal Store Holdings Ltd (ASX: UNI) — there were also some clear losers."
Rollo did notice some patterns among the ASX IPO shares that lost us the most money over the last 12 months.
Hot themes can turn pretty cold pretty quickly
The biggest observation the portfolio manager made was that investors were lured into recent IPO failures with "hot themes".
"Remember, if you want it, there is an IPO banking team that's got the deal for you — and during COVID times this was meal kits, e-commerce and buy now, pay later, amongst other things," said Rollo.
"An IPO on a 'hot theme' can look good in the short run but can come with longer-term pain, as the hot money that chases these 'hot' deals does what it does best and moves on to the next shiny thing."
That means that if the company doesn't soon find a "real" investor base willing to pay somewhere near the IPO share price, trouble looms.
Rollo took 3 ASX debutants as an example of this support vacuum.
Youfoodz Holdings Ltd (ASX: YFZ) was priced during the IPO at $1.50 per share. After listing in December, the stock went for just 54.5 cents on Monday afternoon.
"Youfoodz tried to capitalise on the market's appetite for meal kit delivery that boomed during COVID," said Rollo.
"And takes the award for the worst post-COVID IPO (to date anyway)."
'Illiquid microcap': Adore Beauty's unforgivable sin
He called the float of Adore Beauty Group Ltd (ASX: ABY) "opportunistic" at best.
"The business was listed on a high valuation after being acquired by private equity for a much, much lower price only a short time before."
The online beauty retailer sold its shares for $6.75 during its IPO before listing in October. The stock was trading at $4.55 on Monday afternoon after sinking as low as $3.31.
"ABY is arguably now an illiquid micro-cap with a lot to do to rebuild its reputation with investors after its warning that it's not growing at the rate investors expected," said Rollo.
"A downgrade in expectations before it even delivered its first set of full-year financials as a listed company is a sin not easily forgiven by institutional investors."
'Screened out early': Nuix
It's perhaps not a massive surprise that Rollo picked Nuix Ltd (ASX: NXL) as the third example of last year's IPO losers.
A series of downgrades from the company and shocking governance failure accusations arising from media reports has slashed the stock price from a high of $11.86 to now $2.31.
Rollo said the media investigations into its governance had done a better job of disclosure to investors than the prospectus.
"Caveat emptor… [we] screened out early."
He added that, in the new financial year, the pool of new ASX listings could be more rational.
"Investor appetite has moderated, particularly for loss-making businesses — we see that as some 'heat' coming out of the market. That's healthy and we expect a steady flow of IPOs for us to scrutinise over the coming months."