August 2000 Redux: The Current Flood Of 11th Hour IPOs

IPOs have been on a tear this year in what has been defined as a “healthy IPO market” where just about anything at just about any valuation can get dumped into the lap of the public, including conservative-sounding funds that America’s worker bees hold in their meager and vulnerable retirement accounts.

This week, 25 companies are expected to sell their shares to the public, according to Dealogic, which would be the busiest week since August 2000, which was of course the month during which the S&P 500 just about re-touched its March 2000 peak. The Nasdaq too had recovered part of its dizzying losses since March and had pushed back above 4,000. In the general frenzy, telecom stocks hit new highs.

Everyone was soaking up the hope that the crash that had started in early March was already over. Then at the end of August, the markets just let go, and this time, they seriously crashed. August had been the last hurrah for IPOs, before reality once again settled in, and they just died. The losses for those folks who ended up with this stuff were extraordinary as many of these stocks went on to zero, and their names are now forgotten.

So now we see the scary headline in the Financial Times, harkening back to the glorious moments of those good old days: “US IPO market eyes busiest week since 2000.”

Companies are expected to raise about $7 billion this week. The largest deal is GE’s credit-card spinoff Synchrony Financial, which would raise $3.1 billion and give it a valuation of about $20 billion.

Full steam ahead. The Fed is still printing, though tapering, ZIRP is still in effect, and hype still carries the day. Does anything else matter? No. The market is in full IPO momentum. It’s a window that opens only for a short time once every now and then, a time when anything goes, when no one asks questions, when everything has to be sold, when money grows on tree, and when the only risk on the horizon is the risk of missing out.

We know how it will end: in tears! Because it always does. We just don’t know when.

 

 

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