What happened
Shares of shoe and apparel company Allbirds (BIRD -2.79%) fell as much as 15.2% in trading on Thursday as investors continue to try to find a stable price for the stock. Shares closed the day down 10.2% in another volatile day for this newly IPO'd stock.
So what
After jumping 92.6% in its first day as a public company, it's natural to see Allbirds stock come back to earth. Shares seem to have stabilized in late trading on Thursday and that may be a sign that the extreme volatility of trading has passed, for now.
Image source: Getty Images.
This volatile trading after an IPO is what's known as price discovery, or the market trying to "discover" what the market price is for a stock. Before the IPO, underwriters try to price a stock as best they can, usually slightly below where they think shares will ultimately trade because they want the PR boost from a stock bump and they make money on the overallotment of shares. But sometimes it takes time for the market to reach equilibrium.
Now what
There wasn't any significant news out about Allbirds today, so investors should see this as trading volatility that's normal with newly public companies. If you were a fan of Allbirds' business yesterday that shouldn't change today. But don't be surprised if shares continue to move wildly as the market tries to determine what the future of this direct-to-consumer business looks like.
