Recent IPOs are facing fresh scrutiny from investors concerned about the collapse of SVB Financial Group, which was a leading bank for startups.

“They’re all scrambling to find a new lender,” said Erik Gordon, professor at the University of Michigan’s Ross School of Business. “For a lot of the companies that are smaller and unknown, they are going to have to get a new bank comfortable with them as a client — a client that may have negative cash flow is not usually the most desirable.”

Traders have been contacting sell-side analysts with questions about the situation’s impact on 2021 IPOs in particular, Wells Fargo’s Michael Turrin wrote in a note. While 2021 is the latest year of meaningful IPO activity, all recent listings are subject to the same scrutiny, Gordon said.

It’s just the latest blow to a group of stocks that are trading 42 percent below their offering prices on average, according to data compiled by Bloomberg. This poor performance spills over into their ability to raise capital because corporate boards are less inclined to sell shares at such depressed valuations.

SVB grew so quickly in part by catering to the types of startups that were too small or unprofitable to work with larger banks, Gordon added. For that reason, the uncertainty surrounding companies that recently went public is poised to linger even as regulators backstop deposits, Turrin wrote.

Seeing Vulnerabilities

“While we aren’t seeing evidence of any meaningful balance sheet/liquidity risk tied to SVB exposure, we do note some of these companies are potentially more vulnerable given smaller scale, lesser cash balances and challenged share performance since going public,” he wrote.

The most notable examples from Well Fargo’s coverage universe are platform makers Blend Labs Inc. and WalkMe Ltd., the note adds.

However, Blend spokesperson Bryan Michaleski questioned the accuracy of that call.

“Blend does not have any affiliation with or direct exposure to SVB,” he said in an interview. “Blend works with a diversified network of banking partners to ensure that our business remains resilient.”

Blend has lost 5.4 percent since SVB’s announcement on Wednesday evening, underperforming the Nasdaq Composite Index. Its shares are down more than 90 percent from the July 2021 IPO price. President Tim Mayopoulos was named as chief of the bridge bank that will serve SVB depositors, regulators announced on Monday.

In a statement, WalkMe said a small portion of its cash is held with Silicon Valley Bank but that exposure is not material. WalkMe is down about 70 percent from its June 2021 IPO price, including a 13 percent selloff since Wednesday night. The company didn’t respond to a request for additional comment. 

Weakness among 2021 IPOs was a main driver behind a historic slowdown in new listings last year. New stocks underperformed the broader market during its selloff as higher interest rates weighed on growth stories.