- Tram Ho
According to Bespoke Investment Group, the new equity market has exploded this year, with IPOs in the US raising more than $ 80 billion, far exceeding the highs from the dot-com era. Listed companies ETFs are up 67% recently. And the number of transactions in the third quarter hit its highest level since 2000, according to Renaissance Capital.
The unprecedentedly successful private companies raising capital through a stock listing is a clear positive sign for the current financial system.
Obviously this is also a key function of the stock market, one that has largely overtaken by the private market in recent years. This will change in 2020, when a pandemic hits the economy in a recession and stimulus measures lead to a drastic surge.
For those who bet on the bearish market, not being able to ignore the latest listing boom is a symbol of the phenomenon of a bubble in the market, which is attracting comparisons of overvalued price increases. .
“There are too many risks. The bigger the profits, the bigger the risks. Investors remember the most recent IPO and they want to participate in the next IPO. It is a sign that investors are looking for and Capture growth in a slowing economy, “said Christopher Grisanti, director of equity strategy at MAI Capital Management.
Part of the driving force behind Snowflake or JFrog’s early day rallies was due to the growing hunt for large-scale returns in financial markets, where bonds yielded little or no returns. under pressure throughout the year.
The IPO ETF has beaten the S&P 500 index for 6 consecutive months
The latest IPO is from Palantir Technologies. His company Peter Thiel surged on Wednesday (September 30) after going public, a new approach has been adopted and is becoming increasingly popular without raising capital. Asana, the company that makes workplace management software, also launched and caught the market’s attention.
This bustle has brought the busiest month for IPOs on the New York Stock Exchange. In an interview with Bloomberg, Mr. Stacey Cunningham, President of Nyse (Nyse), said October was also said to be the month of the listing boom.
Airbnb and DoorDash are among those willing to go public in the coming months.
Although this year has been challenging due to the pandemic and recession, it has changed the dynamics around capital costs in the private and mass markets, so there are many companies looking for how to get into the mass market because they’re not sure what the future might bring, Cunningham said.
“It’s not a trend we haven’t seen slow down,” Cunningham predicted.
Cloud software company Snowflake caught the spotlight earlier this month after soaring at its stock market launch, prompting billionaire Warren Buffett to pour money into a rare investment. An initial public offering of $ 3.36 billion is a record for a software company. Similarly, JFrog, which makes tools for software developers, has doubled since its launch.
However, for a portfolio manager, Mr. Paul Nolte at Kingsview Investment Management (Chicago, USA), it is necessary to be wary of such flashiness.
“Take a look at how they transact, the overall turnover, the lack of income and see the reaction on the first day of trading or the first week of trading, it is very similar to what we saw in 1999, 2000. All all they have to say is’ We are in the cloud, we already have cloud solutions’, and suddenly they are hugely valued for it.Similar to ‘I’m on the internet, I am has a .com after my name ‘, in the 1999’, ”said Nolte.
However, the overall market capitalization of newly issued shares is still much smaller than it was two decades ago, according to Mr. Bespoke. This year, IPOs account for about 0.24% of the Russell 3000 market cap, compared with 0.37% for the same period in 2000.
Even so, investing in the Renaissance IPO ETF earlier this year will yield about 67% returns.
Most of the money raised this year will come from the technology sector. Tech companies raised more than $ 12 billion out of the $ 102 billion raised on US exchanges this year, according to data compiled by Bloomberg.
Source : Genk