Remember when IPO’s were the, and by that I mean just that – the – thing? Remember when the news was non-stop tech? Tech this, tech that, and on and on.
Social media? The best tech! Ads for eyeballs tech? Even better tech! Make money in tech? Only if you are in early, much like most multi-level marketing plans. i.e., Get in quick, get yours quickly, get out even quicker before the whole thing collapses.
Sounds a lot like “pitching,” no? But I digress.
As I’ve argued over the years: the unicorn, along with its breathlessly awaited debut upon the “paddock” known as the trading floor of an Exchange for its IPO would dissolve into, more a less, for what it all along – a sham enabled by the monetary policies and perversion of markets facilitated by the Federal Reserve and other central banks around the globe.
And, as proof, I stated even back in 2014 (and earlier) that when it comes to the whole “Unicorn, IPO” thing, “There Will Be Crying.” And the only thing which would prove that my assertions were, indeed correct, was that there will be a sudden drop, if not extinction level event not long after, visible too all that care to look as soon as QE ends.
Question: How did all that workout in 2015, 2016, 2017?
Hint: The news of late has been how the rebirth of the Unicorn IPO in (wait for it…) 2018 will prove it’s “Back to life – and ready to run!” That’s how well unicorns and IPO’s have done since. Or said differently, “How’s that whole Uber™ thing working out? Too soon?”
So now, let’s see a bit more of how things are still shaping up, or down, shall we?
For today I want to use two examples, the reasoning is simple: They were both touted as exemplars for the case of, “We’re baaaaaack!”
The first is Dropbox™. To wit:
The above is a chart representing Dropbox since its IPO debut back in May of this year. As you can see the IPO seemed to underwhelm, although it was touted across much of the mainstream business/financial media that day as a “very successful debut.” The insinuation when listening or reading differing takes via different sources (especially the tech space itself) was that this showed the demand was there for even more unicorns to go public. i.e., “Tech is back!”
Then, the stock just vacillated in-and-around its debut levels.
And with that – so too went its press coverage, everywhere.
Then, like a sighting from beyond the heavens, last month, it suddenly skyrocketed, rising nearly 50% in value in a matter of weeks. And with that, so too did the “house organs” return to sing the praises that those who held on to the faith – were to be rewarded, and that this was just the start.
Sounds fantastic doesn’t? I mean, how can one argue looking at the above “picture” as the like to say in “The Valley?” Because if a picture says a thousand words, then a chart like the above says only one thing using one of my favorite Wayans Bros. skits – “Mo’ money, mo’ money, mo’ money!”
Question: Have you heard anything of late about this much favored recent touchstone of the IPO resurgence? Let’s see what may be the reason for that, shall we? Again, to wit:
Again, to quote the Wayans from the same routine, “Oh, ohhh!”
The above is the same chart only it includes the pricing as of this writing. It would seem something dropped, don’t you agree?
If “tech is back?” Than please explain to all those who may have decided to “get back in and ride the gravy-train” just WTF happened? Or, better yet, what the term “money heaven” truly means. All I’ll say is, “Good luck with that.”
As bad as the above picture paints over all the “happy talk” of unicorns and IPO’s, let’s look at what may be the curtain call, which should put the fear of the market gods into everyone still clinging to the hope being preached throughout the tech space.
It happened last night (or day there) in China. (And yes, I’m quite aware of Spotify™ and wish them well, but I’ll only say this – the more they need to earn money – the more they need to emulate terrestrial radios’ model. e.g., sell commercials. Some call this “disruption” I call it bleeding an industry dry, only to then, have to emulate or evolve into much the same as those you put out of business, only by spilling more red-ink then they could made possible via central banks perversion of the “markets.” Think about it.)
So what happened in China, you ask? Great question, and it is this:
The most anticipate IPO to hit the global markets since Alibaba™ made its debut in Hong Kong, its name: Xiaomi™ (pronounced Shh-ow-mi)
Originally this company was to debut with a valuation of somewhere around $100Billion U.S. dollars. Then it was lowered, and lowered again to where it was around half the original expectation. It ended up pricing at the bottom of the range first anticipated at $17.00 per share.
Then it went live with great fanfare – and sank.
It fell to around $16.00 and, although it clawed its way back towards the IPO open, it ended up closing below it at around $16.80 or so.
So why is this a problem you’re thinking? Again, great question, and it is this:
If the, and again, I mean just that, if the most highly anticipated tech IPO sine Alibaba can’t, at the least, either remain above its IPO debut price? Can’t even close flat, or at least a penny above it? Where the best it can do is close red, just below it, by means of seeming to claw-and-scratch for every share sold?
Again, it was within spitting distance from the embarrassment of showing it as closing red, and it could not do it in one of the most manipulated “markets” that make fungible funds and numbers look down right kinder-garden level in comparison, all in the time frame that what many will call (and condone) the “manipulation period” made possible where the listing banks will put forth resources as to hold up the debut pricing as to not let it fall below where the signaling is almost as paramount as the actual price itself.
And it closed down. i.e., R-E-D.
Need I say more?
© 2018 Mark St.Cyr