Shares of business-to-business (B2B) e-commerce company GigaCloud (GCT 5.37%) skyrocketed on Friday. The stock rose as much as 272% but is up about 175% as of 1:25 p.m. ET.
The tech stock's gain came on the day of its initial public offering (IPO). Given the way the stock is soaring, the market apparently thinks the IPO was underpriced.
The Hong Kong-based company announced yesterday that it was 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 offering expenses.
Unlike Amazon (NASDAQ: AMZN), which operates an e-commerce platform for consumers, GigaCloud's platform, called GigaCloud Marketplace, is aimed at businesses. It helps a global marketplace of businesses seamlessly transact across borders. At launch, the marketplace primarily served the global furniture market, but it has expanded to other categories, including home appliances, fitness equipment, and other large parcels.
Highlighting the company's rapid growth, its gross merchandise volume (GMV) was about $438 million in 2021, up from approximately $191 million in 2020. GMV for the 12-month period ended March 31, 2022, was about $438 million.
Investors are likely concerned that growth could slow the way it has for Amazon following a year of pent-up demand as the economy rebounded from many COVID-19-related lockdowns. Then again, GigaCloud could benefit substantially from any improvements to the global supply chain. Supply chain issues have been more of a concern in 2021 and 2022. If many global supply challenges are solved, this could provide a boost to GMV in late 2022 and 2023.
Investors buying the IPO today are likely trying to trade the stock or are hoping that by investing in this fast-growing company early, they will profit over the long haul.
It might be wise for interested investors to stay on the sidelines as the IPO's volatility moderates. In addition, given how young the company is, it might be helpful for investors to wait for a few more quarters of data points and earnings calls so they can glean more information to help inform a potential investment decision.