"This lackluster performance has led to a cooling off in the IPO market that has caused some new issuers to delay or downsize their IPO plans. When all is said and done, 2021 could represent a high point of the IPO market that may not be matched for years to come," said Thorne and Rubio.
New York University's Aswath Damodaran told CNBC earlier this month that the post-IPO slumps could be due to some investors buying into "the big market delusion." Such investors are "not doing their homework" like examining the business models of these companies, with reality usually setting in as the first earnings report is released, the professor of finance at NYU's Stern School of Business explained.
"It's a slightly troubling sign, but by itself I don't think … it's a red flag. I think it's more a sign of the kinds of companies you've seen going public, many with small revenues, big losses and lots of potential," Damodaran said.