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The SEC move today on Dl ipo’s is a win for “choice” in raising capital no doubt. But cycle wise it warrants some observations....
The last time there were this many ipos was 1999/2000. This was also the only time real notable ipo pops occurred in mass.
2)
To put that in perspective based on last 40 years 3/4 of ipos had day one returns that were ‘normal’. The underpriced quarter on day one overwhelmingly skewed to what is referred to as a “bubble”.
To put that in perspective based on last 40 years 3/4 of ipos had day one returns that were ‘normal’. The underpriced quarter on day one overwhelmingly skewed to what is referred to as a “bubble”.
3)
Of the top ten one day pops in the bubble era all subsequently broke issue. Staggering when u go back and look at it.
Of the top ten one day pops in the bubble era all subsequently broke issue. Staggering when u go back and look at it.
4)
One of biggest critiques of the era was crappy businesses being promoted by wall st insiders. As someone who remembers buying some of those names as retail newbie then the shock only came after.
One of biggest critiques of the era was crappy businesses being promoted by wall st insiders. As someone who remembers buying some of those names as retail newbie then the shock only came after.
5)
The consequence of the bubble popping was a generation of scarred non-professional investors. And extreme risk aversion w respect ipos and early stage businesses.
The consequence of the bubble popping was a generation of scarred non-professional investors. And extreme risk aversion w respect ipos and early stage businesses.
6)
The beneficiaries of all this were venture capitalists and amazing entrepreneurs. The golden age of private markets and nurturing new companies within a select circle of investors was born.
The beneficiaries of all this were venture capitalists and amazing entrepreneurs. The golden age of private markets and nurturing new companies within a select circle of investors was born.
7)
This environment was in fact quite advantageous for those backing these companies and keeping them private as competition was limited and access to capital controlled. Meanwhile hot money manias went to commodities and real estate as empires were built in tech.
This environment was in fact quite advantageous for those backing these companies and keeping them private as competition was limited and access to capital controlled. Meanwhile hot money manias went to commodities and real estate as empires were built in tech.
8)
Now 21 years later a new wave of retail mania has arrived at the same time as a global pandemic. And to boot it’s riding on the back of a legacy of wealth accumulation of the past 20 years.
Now 21 years later a new wave of retail mania has arrived at the same time as a global pandemic. And to boot it’s riding on the back of a legacy of wealth accumulation of the past 20 years.
9)
This mania has some of same characteristics as the last one. Meaning very smart people are buying/recommending businesses they privately think/describe as
.
This mania has some of same characteristics as the last one. Meaning very smart people are buying/recommending businesses they privately think/describe as
.
10)
The rationale being that these stocks will rise on hype/promotion & that getting out can be timed to perfection. At same time there R great businesses to reinforce this speculation and allow for the thematic comfort that innovation and growth will always be there 2 fall bk on
The rationale being that these stocks will rise on hype/promotion & that getting out can be timed to perfection. At same time there R great businesses to reinforce this speculation and allow for the thematic comfort that innovation and growth will always be there 2 fall bk on
11)
The irony of this all is that on the same day @RobinhoodApp cut its margin rate to ‘democratize’ access to stocks the SEC did the same thing w respect to IPOs at the behest of some who argued money was being left on the table/shifted to bankers exclusive clients at their cost
The irony of this all is that on the same day @RobinhoodApp cut its margin rate to ‘democratize’ access to stocks the SEC did the same thing w respect to IPOs at the behest of some who argued money was being left on the table/shifted to bankers exclusive clients at their cost
12)
I say irony because in this tape companies are listing in droves now that seemingly don’t need the valleys nurturing and ecosystem. Pre-revenue is acceptable again as a public entry point.
I say irony because in this tape companies are listing in droves now that seemingly don’t need the valleys nurturing and ecosystem. Pre-revenue is acceptable again as a public entry point.
13)
This of course leads to creative destruction and the same problems that popped every other asset bubble in history. The upshoot is u can now win big again as a novice. Of course that will take decades and some luck.
This of course leads to creative destruction and the same problems that popped every other asset bubble in history. The upshoot is u can now win big again as a novice. Of course that will take decades and some luck.
14)
In the meantime an entire new generation of retail investors will have massive losses and be looking for someone to blame. Against a political backdrop that has become increasingly populistic. Basically, the sec is pouring
on a 
at worst time.
In the meantime an entire new generation of retail investors will have massive losses and be looking for someone to blame. Against a political backdrop that has become increasingly populistic. Basically, the sec is pouring
on a at worst time.
15)
And if a bubble bursts what is the consequence for companies looking to raise public capital? They will face harsher regulations and need to offer deeper discounts to the very same people that regulators are supposedly stepping in to provide them alternatives from.
And if a bubble bursts what is the consequence for companies looking to raise public capital? They will face harsher regulations and need to offer deeper discounts to the very same people that regulators are supposedly stepping in to provide them alternatives from.
16)
The knock-on effects in venture are also pretty clear. Anyone who misses this exit window is going to be waiting for a long time to see the same risk demand. Basically, if u graduating college today u don’t want to be a vc. You should be a public equities investor.
The knock-on effects in venture are also pretty clear. Anyone who misses this exit window is going to be waiting for a long time to see the same risk demand. Basically, if u graduating college today u don’t want to be a vc. You should be a public equities investor.
