Founder of Tech Startup Experiences Billion-Dollar Gains and Losses in First Week
During a successful direct-listing debut this week, the CEO of reAlpha Tech Corp., a small property technology startup, experienced a temporary surge in paper wealth amounting to billions of dollars. However, the subsequent decline in the stock value resulted in the majority of those gains being wiped out.
The Dublin, Ohio-based company’s stock soared a whopping 1,667% in its first day of trading Monday after it listed directly on the Nasdaq. Shares started trading at $23.01 – already above the reference price of $8 – and ended at $406.67.
At the end of the first day of trading, CEO Giri Devanur added $11.2 billion to his holdings from his large reAlpha stake, according to data compiled by Bloomberg. But things quickly took a turn. The stock fell 75% on Tuesday and continued its slide in a week that saw trading halt more than 40 times due to volatility. On Friday, shares fell 50% to close just shy of where they debuted after short seller Spruce Point said it was avoiding the stock.
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That reversal of fortunes reduced the value of Devanur’s majority stake to about $655 million, according to data compiled by Bloomberg.
Before the direct listing, Devanur disclosed that he owned 27.6 million shares, and in a filing this week, the company said he owned about 65% of the outstanding common stock.
“The float is the problem, it’s locked in,” said Kim Forrest, founder and chief investment officer of Bokeh Capital Partners. Even if Devanur were to sell to increase liquidity, it may look bad for him to liquidate his shares, he added.
“This company is stuck between a rock and a hard place,” he said. “It’s a numbers game, and numbers don’t work for this small company right now.”
reAlpha is the latest example of a relatively small and thinly traded company whose huge stock gains after going public are quickly wiped out, meaning large paper losses for the largest shareholders. In August, VinFast Auto Ltd. founder Pham Nhat Vuong saw his net worth rise by tens of billions of dollars as the stock rallied in the days after its debut, only to lose most of that when the stock fell back to earth.
The stumble in the first week also shows how investors view newly listed companies against a weak backdrop weighed down by earnings season, financial uncertainty and geopolitical tensions. This year’s highly watched IPOs, such as Arm Holdings Plc and Instacart, jumped in their debuts but have fallen since then.
Of course, not all companies have warmly welcomed the public market this year. Birkenstock Holding Plc, maker of the famous sandals of the same name, fell in its October debut and has remained under pressure.
reAlpha Tech, which says it uses “artificial intelligence-focused technology” to allow retail investors to participate in short-term rentals such as properties listed on Airbnb, said in a filing with the U.S. Securities and Exchange Commission that Denavuri’s majority stake means that. is a controlling company in accordance with the Nasdaq listing rules. The company did not immediately respond to Bloomberg News’ request for comment.
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