Why GigaCloud Shares Rise Higher Friday |  The furry fool

Why GigaCloud Shares Rise Higher Friday | The furry fool

What happened

Shares of business-to-business (B2B) e-commerce company GigaCloud (GCT 205.99%) shot up on Friday. The stock rose a whopping 272% but is up about 175% as of 1:25 PM ET.

The tech stock’s gains came on the day of the initial public offering (IPO). Given the stock’s rising price, the market apparently thinks the IPO was underpriced.

A chart showing a rising stock price.

Image source: Getty Images.

And then

The Hong Kong-based company announced yesterday that it is pricing its public offering at $12.25. GigaCloud was targeting $36 million in proceeds from the IPO, but that estimate was before deducting underwriting discounts, commissions, and listing fees.

unlike Amazon (NASDAQ: AMZN)Operating an e-commerce platform for consumers, GigaCloud’s platform, called GigaCloud Marketplace, is aimed at businesses. It helps a global marketplace of businesses to transact seamlessly across borders. At launch, the market mainly served the global furniture market, but it has expanded to other categories, including home appliances, fitness equipment and other large packages.

To highlight the company’s rapid growth, gross trading volume (GMV) was approximately $438 million in 2021, up from approximately $191 million in 2020. GMV for the 12-month period ended March 31, 2022, was approximately $ 438 million.

Investors are likely concerned that growth could slow down as it has been for Amazon after a year of subdued demand as the economy recovered from many COVID-19-related lockdowns. On the other hand, GigaCloud could benefit significantly from any improvements in the global supply chain. Supply chain issues were more of a concern in 2021 and 2022. If many global supply challenges are resolved, it could boost GMV by the end of 2022 and 2023.

What now

Investors buying the IPO today are likely either trying to trade the stock or hoping that investing early in this fast-growing company will benefit them in the long run.

It may be wise for interested investors to stay on the sidelines as the volatility of the IPO decreases. Additionally, given the young age of the company, it may be helpful for investors to wait a few more quarters of data points and earnings calls so they can gather more information to help make a potential investment decision.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, serves on the board of directors for The Motley Fool. Daniel Sparks has no position in any of the listed stocks. His clients can own shares of the mentioned companies. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.


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