Euphoric IPO market can be a troublesome sign of stocks
Private private companies stomp to get public this spring.
After a slow first quarter of public offering, the giant Levi Strauss kicked off his debut this week, with stocks booming 31 percent on the New York Stock Exchange.
Lifting Service Lift is next up to bats and is expected to hit $ 23 billion when listed on Nasdaq next week app Pinterest has moved its timeline to list, archiving its IPO prospect with SEC on Friday. 19659004] Uber, with a jaw-dropping $ 120 billion target valuation, plans to release his filing and turn off an IPO roadshow in April, according to Reuters.Slack and Palantir are also on deck in 201[ads1]9.
But a re-energized , euphoric IPO market is not necessarily a bullish sign, according to some industry experts, suggesting that private investors in these companies may cash in their chips.
This month's excitement traces back to the end of last year. see the companies could have listed in the second half of 2018, but put it off. Then came December, the worst month for stocks since the Great Depression.
Larry McDonald, CEO of ACG Analytics, said Silicon Valley clients he was talking to behind the scenes, did not attack listing before the December dip.
"They should have made these deals last year and they put it off," said McDonald, who is also the editor of the Bear Traps Report. "The beatings that these guys took for not bringing these deals in the third quarter were significant. "
Beatings, for the most part, criticized their risk management," said McDonald. "Fortunately, however, for the startups, comments from the Federal Reserve have saved the day. The Fed has suggested that no rate hikes would come this year – having indicated in December that The latest attitude sent stocks higher, giving a solid backdrop for these companies to reach publication.
Many private equity and venture capital investors are now "panicked for just getting out," McDonald said. 19659003] Today's IPOs are essentially a "very bright private equity public that desperately hit a fleeting census after having missed that bid in the fourth quarter and looking down over a 20 percent US stock rkeds drawdown, "McDonald said.
Among the late stage signals: A slower global economy and bond market downturn ahead.
On Friday, the spread between the 3-month government bond yield and the 10-year note rate was negative for the first time since 2007 – conversely, the so-called yield curve – according to Refinitiv Tradeweb data. This happens when short-term prices exceed their long-term counterparties, and the phenomenon is widely considered by investors as an indicator of a recession that is coming in the near future.
Dow closed more than 400 points lower Friday following the Federal Reserve's cautious outlook earlier this week.
Until Levi Strauss, the first quarter had been slow for IPOs, partly because of the government's shutdown. The Securities and Currency Commission – responsible for green lighting IPOs – was closed until Congress and the President agreed to fund the government. Businesses wishing to become public could not archive the necessary IPO paperwork for 35-day closure.
To be sure, the IPO lock can also be timing. Businesses want to go public before summer hits and Wall Street workers take vacation. Getting to the market in the second quarter ensures that their "roadshow" or series of presentations to investors across major US cities gets enough attention before the summer.
Larry Haverty, CEO of LJH Investment Advisors, said the first quarter's rush to go public is "greed more than fear."
"It will continue until the lights are turned off," Haverty told CNBC in a telephone interview. "IPO booms almost never end well."
Based on the over-subscription to Lyft's IPO and successful Levi's listing, he said that investment bankers are likely to rush these deals out of the door. Bankers probably tell clients, "the window is open, but this lift and Levi Strauss is a period of insanity, and we get better at this."
"It's economy 101 – make high when the sun shines," Haverty said. "If you are a technical company looking at selling stocks now, there is no reason for God's green earth to not sell it."
